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Paul: [00:00:22] Hello, everyone, and welcome to the latest edition of Insurance Business TV and whisper it quietly, but we're now firmly into 2023. How are those New Year's resolutions looking? Should move on quickly. The advantage, of course, of those holidays seeming such a long time ago is that we firmly settled into a new year and with it we can get a gauge on where the insurance market stands and what's likely to happen as 2023 progresses. And on this edition, we want to zoom in on the specialty market in particular. It's one that has been thriving in recent times as businesses and individuals alike increasingly seek out market knowledge to place difficult risks in a tough economic climate. Having a genuine niche, whether that's aviation, renewable energy, marine or a host of other classes, has become a must for the modern insurance broker. But what can you expect to unfold in the year ahead? I'm delighted to welcome a genuine specialist in the specialty field, the CEO of Axis International, Mark Gregory. Mark, welcome to IBTV.

Mark: [00:01:30] Thank you very much, Paul, and it's a pleasure to be here today.

Paul: [00:01:33] So, Mark, let's start with a very broad and grand question. What is your outlook for the international specialty market in this year ahead?

Mark: [00:01:43] I think it's very, very positive. The outlook is very good and that's building off the strengths that we saw in 2022. A good indicator of the Lloyds results. Lloyds have come up with an accident year combined ratio for 2022 of 95%. And that's not withstanding the Ukrainian conflict and, you know, some significant hurricane activity in the US. So that's a very, very strong result. So I think we can build on that. There are some headwinds. I think climate change is a big one and that you can see that really evidenced through a reduction in the amount of treaty capacity for catastrophe aggregates. And I think inflation generally is driving, you know, moves around reserve adequacy for a lot of the carriers. So so those would be headwinds clearly in the US and very well signposted of course as well as social inflation. But I think notwithstanding those there's a great deal for us. Um, you know, one example would be transition risk or basically the effects of ESG, where we're seeing much more innovation, many, many more very substantial, significant risks coming into the specialty market, particularly into London, requiring innovation, new product, new capacities. And I think we're the right place. We have the capability as a marketplace to deal with with that increased demand and really a new risk landscape. So I'd say that's very, very positive indeed.

Paul: [00:03:03] So that's an overview of the market in 2023. Mark But if you don't mind for us, just zoom in on the plans for Axis International as well. What's on your agenda for the next 12 months?

Mark: [00:03:15] I think we're in good shape. As I said before, we think some markets at the moment are still remediating as as we're going through it. You know, we've been through a particularly tough time in the marketplace. We're ahead of the curve on that. We're a top quintile performer in Lloyd's. So I think that that that augurs well for us in terms of our plans. It's really I think we're in the right lines of business doing offering customers the right the right products. And we've got very, very strong close relationships with our brokers. We only write business through brokers. That's our our philosophy and I think we're well set there. I think lines that we need to continue to really focus in on our property. We're seeing, you know, increasing demand for property business and rates there are very, very robust, big opportunities in marine in in in credit and political risks. Aviation, the aviation market hasn't really turned yet. We're anticipating that to happen. And then off the back of some pretty robust treaty renewals, we're seeing terrorism, political violence rates moving again, more demand for capacity there. And clearly, just around the Ukrainian conflict, we're very, we've been very involved in marine war in the Ukraine. Lots of construction business, lots going up, not just off the back of environmental or transition risks, but lots of construction out there that were were were focusing in on. And I think. Yeah, we're sort of looking at pivoting our business into two, really. There was quite a lot of discussion and debate a year or two ago around lead follow in the London marketplace. And I think it's crucial to be very clear about your value proposition into the market as an insurer where you lead, what are the spots that you lead in. So clearly, we're very, very focused in the open market on 8 or 9 lines of business where we are a market leader that includes renewable energy, certain marine lines that I've cited before, construction. Et cetera. Some of the very heavy specialty lines like credit and political risk, where we are an acknowledged market leader. So we will be focusing into those. But I think there's also an opportunity in the follow space where in the past specialty underwriters have been writing follow lines as if they were fully fledged open market line. I think there's more and more of an opportunity now to start to bundle that sort of business into portfolios, whether it's Lloyd's consortia, whether it's broker facilities, whether it's reciprocal exchanges with other carriers. And we've spent quite a bit of time innovating around that space and building up a capability to be able to write and ingest portfolios of business very much Underwriter led, very much supported actuarially and think so long as we can continue to write that business at a relatively low cost, there's good margin in there and I think we're providing everybody with a good service. So yeah, you are the lead in my view, and we do and think that is the front of house, that's the shop window. That's our value proposition to the marketplace. That's our value proposition to our customers. That's where we can innovate, that's where we can talk the customer's language around industry, for example, or, and or you follow and think where we follow. It needs to be low cost and managed as a portfolio. I feel very confident about how we're pivoting into the marketplace, confident about the lines of business that we're in. We're doing the right things with the right lines of business, with the right customer base and crucially, the right distribution. So I think we're in a good place.

Paul: [00:06:48] And you touched on several lines of business there. You mentioned construction. You mentioned aviation, but one that really sort of caught my ear, if you want, was renewable energy. Yeah, I think a lot of interest. It's really seen as a growth class right now. What is your appetite and ambition in this space?

Mark: [00:07:06] We saw the opportunity a long time ago and we got involved in renewable energy in 2010. At the time, we were really focused on wind and solar both onshore and offshore, and we've really kept within those parameters. We started to innovate on battery storage a few years ago and came up with some products. And what we've done really is to focus on our value proposition into the marketplace. Our team is located in London. It's actually driven out of London, but we do have a significant presence in the US, of highly specialized underwriters reporting to the London hub. So we're distributed across, if you like, international and the US. And our value proposition really extends beyond just taking risk. We focused a lot on engineering. We do a lot of seminars to our customers and indeed to brokers and indeed in some instances to our to our competitors with whom we often co insure around the technical intricacies of of of of renewable energy. The warranties, the technologies, the emerging technologies. And over the past, you know, dozen years or so, we've we've developed a very very clear view of what our our risk appetites are, what technology we're interested in and what technologies we'd probably rather avoid. I'm not convinced that there's a lot of money being made in the renewables space by some of the new incumbents, but I'm pleased to say that we've got such a strong team. As I say, we have been innovating through engineering and through new products on battery storage, really sort of retail feel as well because we are very close to customer in that in that space and I'm very proud of what we've achieved. I think it's a very good product offering to the market.

Paul: [00:08:57] Yeah. And you're  a brave man as well, Mark, because you mentioned the Ukraine conflict earlier as well. If you don't mind, just give us some insight on how the market has responded to the crisis and how it's impacting your portfolio as well.

Mark: [00:09:10] Let's set out immediately that nobody wants it to be a conflict, but the reality is that conflicts arise and when conflicts arise, customers need their insurers to protect them through, you know, inordinate times and through through very spiky periods of risk. And I think the Lloyd's market, the London specialty market, particularly the London market and Lloyd's, are very, very well placed to do this. We've got a history of it. We've got, you know, advanced products. We know we know what we're doing basically in that space. So there's been, you know, quite a lot of talk about political violence over the last few months. There were indeed a lot of terrorism treaties were renewed at the end of December. And I think the reinsurers understandably cut back a lot of the coverage that they were giving on on political violence through loss definitions and exactly, you know, and capacity. Indeed. So but going forwards, I think, you know, credit and political risk, of course, has also had its part to play here. But going forwards, I think the the if you like, where we will focus our efforts will be on war, marine war particularly, and of course, cargo. We won't be doing this willy nilly, but we'll be working with our established client base but ensuring that they have coverage to get their ships in and out of Ukrainian ports. And you know, that we're able, we will be insuring cargoes of grain that are transported out of the Ukraine and into the world, the world marketplace.

Paul: [00:10:42] Yeah. You've been very, very generous with your time with us today. Mark, if you don't mind, I just want to throw one final question at you, if I may, and that's just for any general tips for our broker audience that are watching today. Any advice that you'd give them as they look at the market in 2023?

Mark: [00:10:57] Well, I think we're all we're all riding, you know, the wave of rate. And that's good. Frankly, it's appropriate. I think certainly as a carrier. We've seen the price adequacy, just not it's not been there for such a long time. Rate increases now we're seeing price adequacy, meaning that businesses is viable again. I was a broker for 30 years, so I want and I gathered that a lot of your audience are brokers. So I want to put on my old hat and talk in terms of a broker rather than as an insurer. Yes, we're riding the wave of rate and we're seeing a lot of business coming into the marketplace, some of it for innovation, but some of it just for capacity. That business will stay until all the domestic markets, retail markets become active again and some of that business will flow away. And I think it's a bit of a fool's paradise to say we're doing great, Rates are up. Fantastic. That that is great for now. But don't think it's sustainable in the long term. I think we need to focus in on our people and we certainly need to focus in on innovation. But my if you like, my clarion call to brokers is make sure that you're close to your customers. Make sure that you're talking to your customers in their language, understanding their industry, understanding their issues. Um, make sure that you're providing as good value as you can. Make sure that your customers see how hard you're working on their behalf, because often we try to gloss over that. But the reality is that brokers are working very hard for their clients right now. Make sure that your customers see that. Be clear about what your value proposition is to your customers, and then hopefully we can manage any sort of outflow of business as the market begins to soften again and as other alternatives become available to those customers. Because I think really the issue here is. Retaining the business that we have really benefited from over the last three years and will benefit from this year.

Paul: [00:13:05] You know, excellent tips and a brilliant way to wrap things up. Mark. My huge thanks to you and to Axis International.

Mark: [00:13:11] Thank you, Paul.

Paul: [00:13:12] And for more from the specialists across the entire insurance landscape, make sure you keep it right here on Insurance Business TV.