How do you harmonise distribution strategies in a rapidly evolving marketplace?
Sara Farrup took over as head of global markets at Axis at the beginning of the year, assuming leadership of one of the largest syndicates in Lloyd’s and a major market maker in areas including cyber and renewable energy.
In an interview with Behind the Headlines, Farrup explained that it’s essential for fast-follow and open-market strategies to align, as well as being thoughtful about which coverholders to partner with to drive value.
And in this episode’s news discussion, Insurance Insider editor Fiona Robertson digests the latest market message issued by Lloyd’s.
Transcript (Please note that this transcript has been computer generated and therefore may contain inaccuracies and grammar errors. Thank you.)
Sam Casey: 0:04 Hello and welcome to Behind the Headlines, brought to you by Insurance Insider. I'm Sam Casey, and thanks for tuning in to the latest episode. Remember, you can subscribe to the podcast either on our website or on your podcast platform of choice. This week's guest is Sara Farrah, head of global markets as Axis Capital. Amongst the subjects we touch on in this is the delegated authority space where Axis is an active participant. Sara told me that to operate in the area successfully, it's essential to have alignment with the company's wider open market strategy.
Sara Farrup: 0:35 Partnering with those trusted colleagues gives you diversification of product geography segment, but you need to understand who you're partnering with, and it's a trusted relationship that is guided by understanding the data, how that aligns with your open market strategies, and really being clear on what does it give you because it's very easy to get carried away.
Sam Casey: 1:03 First up, Lloyd's recently delivered its quarterly market message, which is the focus of this episode's news discussion. I'm joined now by Insurance Insider editor Fiona Robertson. Fiona, thanks for coming back on the show.
Fiona Robertson: 1:15 Always a pleasure, Sam.
Sam Casey: 1:16 So we had Lloyd's delivering their quarterly market message last week. It's always a good opportunity to gauge the feeling in the market and see what their priorities are. What were the overall messages and priorities which Lloyd's and Rachel Turk were communicating this time around?
Fiona Robertson: 1:36 I think really the key takeaway was this sense from Rachel Turk of asking underwriters or Lloyd syndicates not to kind of hurry themselves into the soft market any faster than they need to. So she was acknowledging the sort of competitive pressures that they face and the fact that they have to be competitive when they're quoting, but also kind of just urging them to sort of hold back where they can or just make sure they're still trying to stick to their business plan. So I think that was probably the key takeaway for me.
Sam Casey: 2:07 And as it got a bit more granular, it seems like the one class of business which was laboured out in particular for a bit of a recommend was the property DNF space. Why was it that that was in her sights?
Fiona Robertson: 2:20 Yes, yes. I suppose there's always one class that gets that kind of must-do better grade. Probably feels a bit like being back in school, I'm sure, for all the underwriters when they hear the market message. So I think the DNF market really it just comes down to the pace of change, is the uh message that came across. And that is one that we've been reporting on through the year, obviously. And I think the speed of rate reductions in the property markets have just taken some people by surprise and been one of the defining changes in the market over the past year. So it's it's not surprising. And I think the messaging was yes, there might still be margin. This is all coming off from a high, so we can handle it. But looking ahead, if that pace was to keep up, I think that is just what they were trying to point to as the point of concern. And obviously, and she didn't invoke, Rachel Turk didn't invoke a kind of comparison to the DNO market, which is not the comparison you want to get.
Sam Casey: 3:15 Yes, they've been on the naughty step a few times, especially when Patrick Tierham was delivering them with some fruity language.
Fiona Robertson: 3:22 There definitely was.
Sam Casey: 3:23 Something we've seen a big growth of in lawyers in the last few years, and they've welcomed, but equally have monitored very closely and have some strong messaging around is the whole portfolio solutions space. What was Rachel Turk saying about that?
Fiona Robertson: 3:35 Well, I think it's quite a nuanced message that comes across from them on the facility space. Because on the one hand, Rachel Turk described it as having the potential to be hugely accretive, were her words to the Lloyd's market. And that in itself is quite interesting because, you know, while the smart follow market has just completely boomed and taken off, and I think people now recognize that there needs to be a different way of doing follow business, there is still some element of concern in the market about how those big facilities will impact the broader pricing cycle and how it will impact the market as we get into a softer phase. So that is interesting. But on the other hand, she was also earmarking those who are kind of trying to do a me too approach with smart follow or portfolio solutions and saying that they will not essentially let people get into this field unless they feel that they have the right analytics to support it. And her words were that if they wouldn't bring in capacity to an already oversupplied market, that just wouldn't be useful. There's a bit of a dichotomy there.
Sam Casey: 4:41 With the new Lloyd's leadership, they've walked away a bit from all the headlines we saw at the start or the end of last year about trying to hit a hundred-billion-dollar marketplace. And there's less of that top line target. What are they forecasting and anticipating for 2026 now in terms of scale and growth?
Fiona Robertson: 4:59 So they did release some numbers for 2026. And actually it's kind of interesting if you think about it that they the first number that they mentioned was the underlying growth target, which is currently coming out at a 2.3%. But actually, when you include new business that's coming into the market or the growth in the trackers, it's total growth of 13% above 2025, which would get us to about £67.4bn. So yeah, it's just interesting that the messaging is total growth of 13%, which you might think is great for them, but they're focusing in on the measured growth of the 2% underlying growth. So and the combined ratio target was also given. So that was 91.2%, which is up sort of two, three points from the levels they were looking at for this year. Initially, they were expecting to be somewhere around the 89.7. It's obviously been quite a favorable year, relatively speaking, for major losses. So now looking at 88.7, so just under three points worse as the market starts shifting. But obviously, we'll come down to what actually happens in 2026.
Sam Casey: 6:06 Super. Well, Fiona, thanks for uh sharing your insight.
Fiona Robertson: 6:08 Of course.
Sam Casey: 6:26 She brings something of an outsider perspective to the job, having risen through the industry ranks in the retail sector. I'm delighted to be joined by Sara now. Sara, thanks for coming on the show.
Sara Farrup: 6:36 Thank you so much for having me.
Sam Casey: 6:38 So you started running Access Global Markets at the beginning of the year. First off, how have you found things so far?
Sara Farrup: 6:43 It's been a whirlwind. No, it's been a it's been a wonderful first year. And I think the calibre of the individuals, the specialist underwriting, the multiple platforms that we have, as well as being in this crazy wonderful London market, has been such a joy. It's been a learning curve, but a market with so much diversity, so much opportunity that you know I feel really confident about where global markets is heading and Access as an organization.
Sam Casey: 7:10 And running this Lloyd's focused corner of Axis is slightly different from where you grew up in the insurance industry, which is more of a retail background. How have you found making that switch?
Sara Farrup: 7:20 Yeah, absolutely has. My whole career has been in retail and you know, 13 years previously at Chubb, which is such a wonderful foundation for learning key underwriting skills. But actually, I've never really run a London or a wholesale operation. So when I looked at you know, where was an opportunity both for my personal growth, but what learnings could I take from a different type of insurance? And would that translate into supporting a growth initiative and a different set of visions and strategies? It felt like a really interesting mix. So, you know, certainly personal growth and hopefully I'm bringing something to Axis which is slightly different.
Sam Casey: 7:58 Yeah, is there an extent that that outside perspective is in a way helpful? It makes you ask questions which people might might not have considered previously because that's the way things have always been done.
Sara Farrup: 8:09 Of course, and I think if you look at London as an insurance market globally, you know, it is the oldest market in the world, it's possibly one of the most traditional, and therefore sometimes isn't on the forefront of some of the faster developments that happen elsewhere in the globe and through different distribution mechanisms. But also, I think in my career I've always been the person that asked the question. I firmly believe there's five other people sitting in the room that don't know the answer as well. So I'm not afraid to kind of learn as I go, and I'm really grateful to the colleagues that I've got at Axis and all of our brokers that have been really helpful in helping me understand and also you know validating theories I might have or saying this is why it's done a certain way. But I think there's so much opportunity when you've got a new perspective to have a different viewpoint and then challenge and understand why it may or may not be relevant to the market you're in.
Sam Casey: 9:00 And in terms of the global markets division of Access, could you just explain exactly which parts of the business it is that that comprises, and also how you relate to the parent entity, you know, how how you work together with the people out in Bermuda?
Sara Farrup: 9:14 Yeah, sure, of course. And I think really global markets I think of as is almost like our international division. So the Axis is split into three divisions: our reinsurance business, North American business, and then global markets. And the vast majority of what we do in global markets is business that comes through the London market, either through our company platform or through Lloyd's. And I think that gives us diversity of both product set, of distribution, of platform, and also you know, which partners we work with, which include delegated as a really important cornerstone for us.
Sam Casey: 9:47 Having brought it up, what's your view of that delegated market? It's certainly something which we've been writing about for a number of years, has seen a real structural shift in terms of its popularity.
Sara Farrup: 9:59 I think what delegated brings is partnering with experts that provide niche and specialist underwriting knowledge in markets and segments that you may not have either a footprint or the experience. So partnering with those trusted colleagues gives you diversification of product geography segment, but you need to understand who you're partnering with. And it's a trusted relationship that is guided by understanding the data, how that aligns with your open market strategies, and really being clear on what does it give you, because it's very easy to get carried away. So I think you know, for us, we've got longevity of relationships, we're very thoughtful around where access can add value and equally what we can learn from our cover holders. So I think it's a world that can coexist, but I think it has to align with the strategy you have as an organization. And for us, it's a really important one.
Sam Casey: 10:54 Yeah, and choosing your partners carefully, I guess.
Sara Farrup: 10:57 Of course. And that's part of you know, understanding the longevity and the experience that they have in the marketplace, what experience they're bringing that we can either add to or learn from, but equally making sure that you've got the parameters and oversight to understand what you're writing, because the reality is it's your capacity and it's your balance sheet.
Sam Casey: 11:14 And on the delegated side, we hear a lot more now about data and it being a bit more transparent, what you receive as an insurer in the in the past. Once a month, maybe once a year, you get a board row. Whereas now it seems like it's a lot easier to manage, is that a fair assumption?
Sara Farrup: 11:29 I think what's been you know incredible for me is the amount of data that exists in the London market and perhaps you know, still how analogue sometimes the transition of that data has been. And that's definitely a difference that I've seen compared to retail, and perhaps how there's it's slightly more modern. But I think with the evolution in the growth of delegated, the facilitization, and how we're looking at alternative placement structures, it's created a real surge and a real shift in how insurers, brokers, and clients have all had to think around how do we exchange all of this information. And with that, real-time data provides such valuable insights, but it's only useful if you can put it somewhere and look at it and draw conclusions from it. And I think one of the challenges that I've seen within the marketplace is the fact that pretty much all of us are using legacy platforms. So we want to put huge volumes of data into platforms that were not necessarily built for that volume or cadence. So certainly, you know, we're looking at how do we invest in that foundational technology and how do we then make use of that information to be able to provide insights both to partners, to our underwriters, and how we think about risk profile, because that's really, really valuable. And then when you've got that, then you can start to look at the technologies that we all constantly talk about, whether that be machine learning or AI, to really give us insights, to make us smarter about risk selection and fundamentally allow our underwriters to underwrite rather than pull together lots of spreadsheets.
Sam Casey: 13:00 And the other big distribution shift, which we've seen recently, but again, it's very linked to data. It's in a sense quite similar, is the whole rise of the facilitization of some corners of the market. I know Axis plays in that world a bit. What's your view on how that's changed?
Sara Farrup: 13:17 I don't think facilitization is new. If you look back, facilitization was how to create an offering to clients which provided them something that wasn't necessarily easily achievable through multiple insurers in an open market. And certainly facilitization has been around a long time in retail and the same in the wholesale market. I think where we've seen the real shift is into these sort of auto-follow placement strategies, which again, you know, are a movement, ones again that has still been around for several several years, if not tens of years. But I think that the newest movement that certainly I see is where we appear to be moving on follow placements, which is how do we create efficiency in that follow line placement? And how do you digitalise potentially that capacity play? And that really does involve a big shift in the market, both in terms of how we exchange data, but how you really retain value in the chain for the insurer when distribution is becoming more commoditized.
Sam Casey: 14:21 And does it feel like it's a durable structure? Because the sceptical view people put around these sort of fast flow facilities is it makes sense taking a slice of the market as such when the going is good. We've had a really strong period of price rises, but then in a few years hence, if the market softened and pricing is more challenging, it suddenly becomes a slightly different story.
Sara Farrup: 14:44 I think there's probably a couple of points. I think one is the success in my mind of these is about how whether the indexation is big enough. And if you've got indexation, then you get a true portfolio view. And then secondly, as we referred to earlier, how are you using that data? If you are blindly putting capacity in any form of facility or fast follow, and you don't see what's happening, and you don't have a viewpoint, an exit strategy, a management, you will just follow the fortune of that market. But how you use that information to then inform open market strategies to be able to have conversations around actually that is a client that we would like to write on a lead proposition basis, can be really valuable. So I think it's the combination of all of them. And I think certainly from a market perspective, what we've all got to be really clear on is not losing sight of what the client need is. And sometimes that's capacity, sometimes that's about specialist offering. And I think in London we have the ability to bring all of it together.
Sam Casey: 15:44 And what's your view about that softening in the market which has taken place? I don't think it's uh controversial statements anymore to say that we're in a soft market compared to what we've seen. Is there anything about it that alarms you at all, or is it a trend which was to be expected?
Sara Farrup: 15:59 Look, I think it's a marketplace and it's a marketplace that's covered by cycles. And certainly in my career, I can't remember a hard market for as long as the one we've had. So it always feels shocking when something changes, what felt like radically and overnight. But I think the reality is that we've been in a situation where we've had multiple quarters, multiple years of hardening rates, which have meant plentiful results for the insurance market, which has been wonderful. And I think it's these, it feels like the speed of certain lines has been greater than others. But actually, the lines that have seen, in my experience, the most acute suffering are the are the lines that have had the greatest rate hardening. But I go back to the fact that this is a market. We've been here before. It's also around using data, granularity, and understanding of your portfolio to know where you want to trade, where you want to hold, and where you feel that you don't want to deploy the same level of capacity. But all lines are not equal, all geographies aren't equal, and that's the beauty that we have, certainly in our book, and the diversification is that I don't look at one line and say that's the result for everywhere. And I think that's the important piece is about having that mixture to be able to manage the overall cycle within your portfolio.
Sam Casey: 17:10 One area where Axis is really well known as a leader is the cyber market. Anyone who's been paying attention just to the general news rather than the insurance market will have seen there's been a string of high-profile cyber incidents this year in the UK and also globally. How's the market coping with that?
Sara Farrup: 17:30 I think the great thing about the cyber market is the capacity and understanding that's grown up through the cyber market. And remember, the market's not actually that old. It's a relatively new product, circa 30 years old. But I think what the insurance market has done is evolved the product, the capability, but also around how do we think around pre- and post-incident and how do we support clients when we're thinking around risk management and not just the provision of a policy. The uniqueness of cyber, as we all know, is there's no geographical boundary. Ensuring you understand what you're underwriting, what the supply chain looks like, is critical, but equally is an area that has the broadest evolution of risk profile. We talk about AI in such positive ways when we talk about our own technology, but AI also represents a different risk for us when we think around its misuse in cyber.
Sam Casey: 18:21 Does it increase the cyber threat, the idea of AI being used by bad actors as they're normally referred to?
Sara Farrup: 18:27 Potentially, yes. And I think that's an area that we all have to be aware of when we're underwriting these policies. But I think, you know, it has been a market, again, which has been through a significant period of hardening. There's plentiful capacity, and actually, I think there is a role for insurers to play in terms of global penetration. We still know that actually, even when you look at the headlines that we've had over this past year, there are fairly high-profile names that either haven't bought or potentially haven't bought the limit that perhaps they needed. And these are big sophisticated companies, when you start to go down chain in terms of size, penetration in SME and middle market is still really, really low. So there is, you know, one, there's opportunity for new, new growth for insurers, but also there's an opportunity to start to educate around the real the real risks that exist around this market and how insurance can provide a solution.
Sam Casey: 19:20 Is the momentum on that front in terms of generating that new business? I mean, does some of these high-profile instances where people don't have cover, in a sense, help articulate the value of the product?
Sara Farrup: 19:34 Certainly, I think it's increased awareness and it's certainly increased the conversation. I think we have yet to see whether it's going to create a surge in buying behaviour. I think most sort of sophisticated larger buyers already have a provision. I think the question is is what they're buying sufficient? And also not just around the coverage that they're buying, but how is their risk management evolving? And again, we have the experience both through the policies that we're Underwrite the markets that we work in and the claims that we see to help educate and help that risk management structure as that market hopefully grows and evolves.
Sam Casey: 20:10 Cyber's one key market access is very well known for, another is renewable energy. And in addition to renewable energy, you're actually trying to target the energy transition more broadly, and you've got a dedicated syndicate to do that. Why is it that having a syndicate just doing that was a decision that was made? What does it allow you to do that maybe you can otherwise?
Sara Farrup: 20:33 Sure. I think really we recognised, I suppose, the trend in terms of organizations that are now starting to transition their energy needs. And we knew that we had the capability across multiple lines to provide a holistic solution. You know, risk managers don't want to talk about individual product lines. They want to know that they have the opportunity to be covered cradle to grave, whether it be the financing that's being set up at the beginning and providing a credit cover to the construction, to the ongoing operations, to the BI liability, etc., etc. And we knew we had all of those product line capabilities, as well as risk management and engineering and claims, that we wanted to put it together in a holistic offering. And it felt like the right home for that was Lloyd's, to be able to give us access to global markets, but also to be able to create something that was unique. And the choice of the 2050 naming convention is it wasn't ironic. And certainly for us, it's an area that we continue to see to grow, we continue to see investment in, and we believe will continue to be key for us as part of our offering.
Sam Casey: 21:34 And one challenge, which has always been the case, ensuring these kind of prototypical technologies, which is obviously fundamental to the transition, is that it's new. RD is often still happening, faults can occur in that market, but there's that going on at the same time that there's lots of capacity and competition because it's it's perceived as a real opportunity. How do you manage that balance?
Sara Farrup: 21:59 I think it's about continually upgrading your knowledge. And I think the one thing that we've been very clear on is that we have fantastic underwriters, but we also have brought people in from industry. And actually, if you have a foundational knowledge of the industry, then there's a level of underwriting that you can understand and learn, and equally the same for risk engineering. And we work really closely with both our clients, our end clients, our brokers, and loss adjusters to keep ahead of that technology. And also the benefit of the London market is a subscription market. And these risks are significant. So nobody is writing this on their own. So there is also the beauty in being able to share knowledge and grow the knowledge base of the market to be able to prepare and create innovation and solutions.
Sam Casey: 22:44 The London market, one thing it doesn't have a great reputation for is achieving decent gender spread at the very top of companies. It's something which the LMA has been quite vocal about. As a female CEO of a Lloyd's business, do you think there's more the market can do on that front?
Sara Farrup: 23:01 Gender is an important metric and it's actually the easiest one to measure. I think actually diversity of in all elements is something that we should be striving towards. And it just so happens to say gender is the easiest to manage. But I think it's also about creating an environment where everybody feels valued, everybody feels that they can be themselves, and that organizations create the flexibility for people to be able to succeed regardless of background and experience. And I'm a huge advocate of the saying if you can't see it, you can't be it. And I think it's really important that we have representation at each level to be able to demonstrate to people that there are abilities to grow your career, whatever your diversity is, and to be able to do that in one of the best markets in the world.
Sam Casey: 23:44 Well, on that note, I think that's a good one to end on. But sorry, it's been great speaking today. So thanks for coming on the show.
Sara Farrup: 23:50 Thank you so much.
Sam Casey: 23:55 Before you go, here are some of the top headlines from the past fortnight. Insurance Insider published the results of its annual stamp capacity survey, which found that the market's stamp capacity is set to grow by 4% to £58bn next year. In the latest battleground in the Breaking Talent War, Guy Carpenter's case against Willis Free has been taking place in the High Court. And former Barbican CEO David Reeves is working on the establishment of an MGA targeting nuclear risks. That's all for this episode, but we'll be back again next week with the final episode before the Christmas break.