Grassroots, non-Nat CAT and pandemic-proof
Updated: Sep 30, 2021
For many years, players in the insurance sector have pinned their hopes on Asia as the engine room for business growth. Sometimes this interest is plain vanilla and involves opening branches and rep offices – and sometimes it is far more subtle. We spoke to AM RE’s Ms Shevawn Barder about the place Asia holds in the growth plans of the syndicate.
By Paul McNamara
In almost every sector of the financial services business it pays to be a specialist – focusing on a niche and executing activities professionally. The business of writing specialty quota share (QS) reinsurance that matches US cedants with Asian securities is certainly a niche – and one that has been playing out well for AM RE Syndicate, as its CEO Shevawn Barder explained to Asia Insurance Review. Dallas, Texas-headquartered American Reinsurance Syndicate is a boutique specialty reinsurance specialist with a focus on the programme space – underwriting commercial motor, general liability, marine, inland marine and cyber.
How does a Texas-based syndicate spot the business opportunity in writing specialty QS reinsurance matching US cedants with Asian securities?
“The business opportunity grew naturally from our longstanding reputation for writing QS reinsurance in the US specialty market,” said Ms Barder. “We have been writing it for over 20 years now for a variety of stakeholders. Previously, we operated as a coverholder at Lloyd’s, but things changed rapidly once we were introduced to Asian securities by our sponsor broker, Willis Re.” Ms Barder sees great synergies between the very long-term perspective that Asian securities have with their relationships and their ability to engage with AM RE and obtain grassroots US primary business. “This gives them significant diversification in their existing portfolio. They recognise our expertise, and the addition of this high-quality US grassroots business to their portfolio is a real value-add for them,” she said.
“In terms of the business opportunity and what works well for us, we specialise in writing programme business that has low limits, non Nat CAT and is well-geographically spread. Currently, the market is such that rates are hardening in a significant way, and there are tremendous opportunities for us with the support of our Asian security. The market is working in our favour right now, and it will continue to harden this year and next in the segments that we’re writing,” said Ms Barder. COVID-19 has changed the business landscape for everyone and inevitably this means that the focus of businesses in 2021 might be quite different from last year. How will this play out for the syndicate? “In 2020, during a time of significant dislocation, we have had our best year yet,” said Ms Barder. “The US excess and surplus (E&S) lines market has hardened and we have been able to capitalise on this change. We have been able to create a strong core of business that is highly profitable. This is to do with our best-in-class underwriting expertise and top-class analytics. We have not experienced any COVID-19 losses or any disruption due to COVID-19. We have a grassroots, non-Nat CAT, pandemicproof model that has served us well. We have established excellent traction in the market which we will continue to build,” she said. Ms Barder expects the current dislocation to continue in 2021 until a vaccine is widely available. “We expect the current hardening of rates to hold moving through the year,” she said. “This will create a strong underwriting environment in terms of rates, terms and conditions.”
Growth in business lines
To date, the syndicate has focused on specific areas like commercial motor, general liability, marine, inland marine and cyber. Does Ms Barder expect growth to come from within those lines – or is further diversification on the cards? “We have looked at the market critically to identify classes of business that are non-Nat CAT, have longevity and consistency of result with a scope beyond the initial hardening rates cycle,” Ms Barder said. “We have focused our expertise on the programme sector because our strengths and expertise are aligned with this segment of the business. Programme business requires a specific skillset and is structured on a QS model which we have been specialising in for 20 years. Programme business cannot be written at a distance, which is why we relocated our company to Dallas, Texas which is at the heart of the programme market.” And Ms Barder seems confident that this growth will continue. “The programme market continues to strengthen in 2021,” she said. “This is to do with demand in the US economy and change within the reinsurance industry. Through working with our existing cedents and new securities, we will further diversify our portfolio of business. Growth will be achieved through new hires, by partnering with our existing cedents to provide the necessary capacity that they require to support continued growth in their businesses, and working with new securities to create diverse lines of business.”
Playing to strengths
Are there ‘hidden synergies’ in having a QS reinsurer and an E&S carrier under the same umbrella? “Absolutely,” Ms Barder said. “The creation of an E&S lines carrier is a natural extension of our existing model. It is completely complimentary as it will allow us to retain a slice of our very profitable portfolio. “Through the creation of an E&S company, we will be sitting alongside our existing securities participating in the same business we write for them. It is a great endorsement of our book and our model. One thing that is key to our business strategy is aligning the interests of ourselves and our business partners for a profitable outcome. Having both a QS reinsurance MGA and an E&S carrier under the same umbrella will allow us to do that. It will allow us to continue to access high-quality business while also retaining some of the risk,” Ms Barder said.
What are the emerging opportunities?
AM RE has identified a significant amounts of business that it cannot participate in due to lack of capacity – forcing it to be creative. “The creation of the E&S carrier will allow us to write this business and retain it within our company,” Ms Barder said. “An E&S carrier will allow us to create diversification within our business model. We will be able to harness our strong market relationships to continue to build on our business platforms. We have excellent broker relationships that we can leverage to write diversified lines of business. Although we have not yet been successful in our capital raise, we are currently engaging with several private equity companies and seeking to launch our carrier in 2021.”
Looking to the future
As with any growing business, adapting to prevailing conditions is critical. Two years from now, how will Am Re Syndicate look different from the way it does today? “Two years from now, provided that our plans come to fruition, we will no longer be AM RE Syndicate – we will be AM Star Hold, a holding company with both a specialty reinsurance MGA, and an E&S lines carrier,” Ms Barder said. “We will be writing in excess of $1bn of US primary specialty reinsurance business. We feel confident that having both organisations under one roof is complimentary and will consolidate our position to become a market leader in the programme space. One of the most noticeable effects this will have will be an increased diversification in classes of business underwritten. “We will also have launched a claims management company, AM Star Claims, that is a further complement to our existing companies. AM Star Claims will provide claims oversight expertise and support the claims settlement function that is a key part of the programme market segment. It rounds off our host of services that our cedents will benefit from by engaging with us to do business. Servicing our clients is key to our success and we work hard to assist them in any way we can so that both our interests are aligned to achieve growth and a profitable outcome.”