With over 30 years of specialty insurance experience to his name, Andrew McMellin (pictured) has a finely tuned understanding of what it takes to navigate the London market.
In a recent interview with Insurance Business, McMellin, who was appointed to lead Markel International’s Wholesale division in January 2022, shared his insights into what’s impacting the London market today, including the heightened risk environment. Looking across the market, he noted it’s in very healthy shape from a profit standpoint. “It has gone through a period where there had to be remediation and we saw a little contraction,” he said. “But we’ve had some good years now and we’re seeing good profit come out of that.
“That has brought confidence back to the marketplace, and I believe we’ve regained much of that confidence. We’re also seeing increased business flow into London, because people see that London is more open and more receptive after having gone through a more challenging period. And London is the preeminent insurance ecosystem – you’ve got brokers, underwriters, claims adjusters, advisors and lawyers all in a square mile, which helps to facilitate in-person interactions and innovation.”
The specialty market is proving a natural home for newer lines of business such as cyber, he said, where the demand curve is increasing, as well as other areas including energy transition solutions. There has been an increase in overall specialty insurance penetration globally.
“Particularly when we think about the Asia-Pacific region, we see how the economic growth in the region is increasing insurance penetration within specialty,” he said. “And we continue to invest heavily in that part of the business for exactly that reason. And also because some of that business comes into London, which continues to lift the line.”
Turning his attention to more macro considerations that impact the uncertainty facing insurance, he highlighted the impact of climate change on how the market thinks about the interconnectivity of risk, how models are responding and how perils are evolving. Then, there’s the geopolitical aspect to consider, he said, as it’s still a very uncertain world, and one in which half the global population has had elections this year, albeit with some being more influential than others.
“Today, there’s a huge amount of underlying – and fast-moving – uncertainty in the world, whether that’s geopolitical, climate or cyber risk,” said McMellin. “Our clients are looking to us to devise cost-effective solutions and maintain a sustainable insurance market in a world that is increasingly risky.”
Despite this, McMellin highlighted that the market has become more competitive in areas. No matter what anyone tells you, the insurance market remains inherently cyclical in nature, he said, and it’s a matter of pure economics – capital in, capital out – driving growth or retraction.
Speaking about his conversations with underwriters on his team, it’s clear that this competition is starting to show through in areas. According to McMellin this isn’t a surprise – the question is how to position themselves to manage through the cycle to create a sustainable proposition. The market is seeing increases in capacity whether that’s from carriers, or Lloyd’s Syndicate uplifts for 2025, or new MGAs coming into the market.
“Domestically, we’re seeing markets become more mature and emboldened, so that creates a little bit more competition for London,” he said. “There are definitely some areas where we're still seeing some additional pressure on results. For instance, everyone's talking about concerns with US casualty, and I think there's still a bit more stress to come out of that, which won't respond in the same fashion as other segments of the market.”
Given some of the headwinds and tailwinds shaping the market today, the impetus is on insurance companies to make sure they’ve got a strategy fit for the long haul to provide a sustainable product. Looking to the future, McMellin emphasised how Markel International has made significant investments not just across its underwriting team to position itself strongly within its chosen classes of business, but also across its portfolio solutions team, its distribution team and its claims team to make sure its underwriting decisions are well supported.
“The work that we’re doing within our operations area is seeing us undertake quite a transformation,” he said. “We’re implementing a new type of operating model to relieve administrative burdens from underwriters and claims professionals, allowing them to focus on what they do best. That sets us up well to deal with the next five years, which is more than likely going to be more challenging to navigate than the past five.”
The focus for him and his team is on managing thoughtfully through the cycle, he said, and everybody across the insurance ecosystem has a role to play in providing that protection to insureds, while securing the long-term viability of the market. “When we speak to our brokers, we’re keen to underscore the part we all have to play in ensuring sustainability,” he said.
“If we fail, capital will withdraw, and capacity will diminish. Brokers have a crucial part to play in this, because, at some point, if you don’t get it right, people will pull away. So, we have to work together to ensure sustainability so that we can confidently offer clients different, more efficient and innovative capacity that will endure across the cycle.”
