This article was produced in partnership with Sum Insurance
Insurance Business connected with Jeff Somerville, managing director of SUM One80 in Canada, to discuss P&C market volatility and why SUM’s unique business model is reaping rewards.
Property and casualty insurance underwriters have faced a tough daily grind in recent years, and retail brokers have borne the brunt of the underwriting actions taken by insurers. They’ve been forced to correct poor underwriting results across many lines of business by limiting capacity and restricting coverage terms and conditions – all at the same time as dealing with the COVID-19 pandemic and the unprecedented challenges it has caused around business interruption, supply chain and service disruption, and economic inflation.
COVID-19 disproportionately affected some business sectors – like hospitality, entertainment, leisure, recreation, and travel/tourism – due to government-mandated shut-downs, social distancing measures, and border closures; but other sectors, from healthcare to recreational products and last mile transportation, enjoyed a surge in activity during the pandemic. This caused both challenges and opportunities for insurance underwriters.
SUM Insurance, a Canadian managing general agent (MGA) for commercial, property, and other specialty insurance products, was able to manage this volatility successfully through its diverse product suite and its risk-based underwriting strategy. The MGA, a subsidiary of One80 Intermediaries, has broad in-house binding authority on behalf of numerous insurers and reinsurers to design, underwrite and deliver insurance products to brokers throughout Canada. It is an open market, so it does not require broker contracts nor volume commitments from its customers.
Jeff Somerville, managing director of SUM One80 in Canada, explained: “Our underwriting strategy is a tried and tested formula, organized around product lines – such as, commercial general liability (CGL), excess umbrella, and property. We underwrite individual risks on their merits within these product lines, rather than focus on specific niches or sector programs. Each of those products or product pools is subscribed to by a panel of insurers, with each carrier taking a set percentage of every risk written. Because their limits are shortened via the pool structure, we’re able to negotiate broad underwriting authorities, which are quite unique in the marketplace.
“We can tackle business from soup to nuts, which has helped us stay relevant through this hard market cycle. We are true risk underwriters who assess every risk on its own merits, and we try to bring commensurate coverage terms and conditions that add value to all stakeholders – the insurer, the insured, and the intermediaries – and we’re doing that all day, every day, trying to build a highly diversified portfolio by product, class of risk, geography, and every other variable. These efforts tend to reduce uncertainty and correlation to both insurance and market risks, generating a more predictable, stable, long-term outcome for all of our stakeholders.”
On August 1, 2020, SUM Insurance was acquired by One80 Intermediaries (One80), a US national wholesale broker, and program manager. Both companies uphold a similar entrepreneurial culture, risk underwriting DNA, and strategic long-term vision revolving around broker distribution. While the US insurance market is different to Canada’s, in that it is much more organized around industry verticals as opposed to individual products, the SUM team has been able to leverage One80’s intellectual capital since the acquisition to develop several new product offerings.
“We’ve been able to tap into their intellect, experience, and carrier relationships to up our game and improve our knowledge base in certain verticals,” Somerville told Insurance Business. “That, coupled with recruitment of some new talented underwriters here in Canada, who have strong backgrounds in certain niches, is allowing us to develop new product offerings.
“Pretty much every restaurateur or establishment owner in Canada would like another alternative in the insurance market. They’ve taken hits from all sides – from the COVID-19 lockdowns, as well as the tough insurance cycle which has been working against them. There was a lot of competition in hospitality insurance in years past, which drove the pricing down and liberalized terms and conditions – but that started to show through in poor underwriting results […] and there was soon a rapid tightening of the screws. A lot of competitors exited the market, capacity shrunk, and pricing and risk selection criteria went up. We think there’s an opportunity and a need in the market for alternative casualty solution, and we're working towards that.”
On April 1, SUM will launch a differentiated and enhanced product offering for construction wrap-up liability. Somerville commented: “If you look at the crystal ball, the amount of construction activity predicted for Canada in the next five years is quite profound, both in terms of infrastructure works from government spending, and residential works. We think there’s going to be lots of business out there, and we definitely want to put our best foot forward, as we think we can provide value by harnessing our in-house underwriting expertise to the insurance capacity we have assembled for our new product offering, commencing Q2, 2022.”
While casualty lines may be what the SUM brand is known best for, it has long been a participant in the commercial property market. Hard market conditions have made their offering more relevant than ever, with a team of 14 writing a wide variety of business – including non-lead subscriptions via broad in-house underwriting authority securitized by a panel of first-class insurers.
Somerville said the biggest hindrance to SUM Insurance providing value and service in the commercial property market is the lack of underwriting capacity – but this is also providing opportunities. He said the MGA is close to securing several new partnerships that will enable it to deploy more capacity and thus increase the total insurable value (TIV) it can offer, lending increased flexibility and relevance to its offering into the marketplace.
“Moving forward, our tactics are to stick to our knitting and to maintain our ethos,” Somerville added. “We are an underwriting shop, so we’ll take on risks based on their merits, and we’ll put out commensurate terms and conditions. We know that we have to earn the business every day, and if we aren’t adding value, we’ll lose it. We will continue to adjust our formula to retain our relevance for our customers in all industry sectors, and we will continue to develop products that are innovative and/or addressing niches that are currently under-served.”
