From just Clive Davidson (pictured) three years ago and only a professional indemnity product, to the addition of legal expenses and tax audit cover in 2020, the six-strong financial lines team at Agile Underwriting Services has now expanded even further following its success in negotiating access to Lloyd’s capacity for excess layer directors’ and officers’ (D&O) risks.
“It’s well known that the local D&O market has had a lot of capacity pulled away from it; rates have gone through the roof; some insurers have withdrawn; and the average D&O insurance has increased over 200%,” noted Davidson when Insurance Business spoke with the financial lines head.
“In order for us to provide value to the market, as an agency, we need to provide capacity at a time when it’s most needed, as opposed to when everybody could do it. So, we found an opportunity to find some capacity with a Lloyd’s syndicate that is interested in being involved in the Australian market but on a controlled and managed basis.”
Essentially, the Sydney-based Lloyd’s coverholder will be the syndicate’s eyes, ears, and nose on the ground, with Agile providing its local knowledge while accepting a selective view and still creating a commercial proposition.
Davidson explained: “They get drowned in submissions from Australia. Prices are getting really expensive and everyone is looking for cover, so all the submissions come pouring over but they don’t really know much about these companies. So, we’ve taken on the responsibility of being the syndicate’s local filter to define what is worth participating on, and what isn’t worth participating on, in the current risk market they have.”
Earlier this year, the temporary changes to the continuous disclosure laws in Australia were made permanent, in a move that Treasurer Josh Frydenberg said would discourage opportunistic class actions. According to Davidson, this influenced Agile’s foray into D&O.
“The key thing that encouraged me to get back involved in D&O was the fact that the government decided to leave on the extended indemnity or disclosure provisions that they put in place for COVID, which means that now there’s a higher threshold for directors than there used to be,” he noted. “From an indemnifying perspective, this means a little less on the class actions.
“That’s where we’ve come in and said we’re going to provide capacity back in the market. There has been a reluctance to engage when pricing has been volatile, litigation has been high, and the local insurers have been finding their new position in this D&O market. So, we’re in and looking to do a bit of business.”
For now, though, Agile is focussed on excess layers (but with the prospect of eventually expanding into primary) for large unlisted companies and the smaller end of the listed firms. Currently the underwriting agency won’t be targeting financial institutions and property companies, and will also be staying out of automotive, aviation, and travel and leisure.
“Capacity will return to the market over time,” Davidson told Insurance Business. “It’s part of the insurance cycle. But we’re at the peak of the hard market at the moment, especially in D&O, so it’s probably about as hard as it’s going to get as far as finding a market to place insurance and then, secondly, how much you pay for that insurance and how much you can buy.”
“Large corporate entities often bought 250 to 300 million towers of D&O; now sometimes they can’t get past 150,” continued the financial lines expert. “Because of that, everyone’s been feeling and valuing D&O insurance a lot more. So, our position is that we will reflect the trust that’s been given to us by the syndicate, to stay within a selective laneway and re-enter the market for them, and then build the business out.
“As the market starts to evolve, we will probably get broader. We will probably offer areas where we currently don’t do, and so on and so forth. But we will see, I think, more capacity entering the market over the next 12 to 24 months, but in very selective forms. So, [that’s] good news for brokers in the long term, but it will still be a little bit tough for the next 12 months.”
For the Agile team, meanwhile, Davidson’s forecast is that it will be a busy period.
“We’ve just been quietly getting on and doing our thing and just bit by bit evolving and developing and expanding out,” he stated, “and suddenly people are actually starting to notice we’re around.”
