Novatae Risk Group (Novatae) will not repeat the mistakes of US rivals that have failed to make the most of Lloyd’s market broker buys, the wholesale broking group’s chief executive has set out.
“A lot of people do go down [the Lloyd’s] route but sometimes it doesn’t work so well, and it just seems to languish,” Novatae CEO Richard Kerr told IBA. “A lot of that is because they don’t really understand that market, you can’t just open up and expect everything to start happening.”
Novatae, World Insurance Associate’s (World Insurance’s) consolidated wholesale broker and managing general agent (MGA), made its Lloyd’s play in March. The Goldman Sachs and Charlesbank-backed business purchased London-based Bretton Woods International (BWI) for an undisclosed sum.
It’s been just over a month and things are already “exploding”, according to the chief exec, who took the helm at Novatae following its 2022 acquisition of Dallas, Texas-headquartered Marketscout.
Kerr pointed to new coverholder facilities, displaced teams that have expressed interest in joining the business, and more deals with historic broker partners. And, Kerr said, onlookers should expect more action to follow.
“Sometimes people do these things and they just don’t give it the love and attention that it needs,” Kerr said. “You spend $100 million on buying a Lloyd’s broker, now you need to spend $200 million giving them the tools and the people and the strength that they need, so that’s where we will really be able to excel.”
Pictured: Lloyd’s underwriting room
In Kerr’s words, Lloyd’s is “ripe for a new upstart”. With Goldman Sachs having thrown $1 billion behind World Insurance last August, the CEO was confident that his business would be the one to deliver on this.
“You plant a flower, you’ve got to add a little fertilizer, you’ve got to give it some love back, get some water on it, pay attention to it, and it’s going to grow and be really beautiful,” Kerr said. “You can’t just plant it and walk off, and that’s where some of the mistakes are being made.”
The 2020s have seen a flurry of US brokers snapping up Lloyd’s businesses. Among these:
The wholesale broker and MGA already has pre-existing relationships with London firms and acts as a Lloyd’s coverholder. Existing Lloyd’s broker relationships “won’t necessarily end” due to the BWI buy, Kerr noted.
“We have a lot of great friends and a lot of great talent there, so we’ll continue with that – but it gives us a stronger foothold to do other new deals in the future,” Kerr said.
It was always part of the Novatae plan to launch a Lloyd’s broker, according to Kerr. The CEO is bullish on Lloyd’s future and has been for some time.
A “nice” set of 2023 results has helped. Lloyd’s reported underwriting profit of $5.9 billion and a combined ratio of 84% for the year, its best result since 2007 and a far cry from the losses that dogged it in the late 2010s and into 2020.
Lloyd’s has seen consistent improvement in its underwriting results in the 2020s:
|
Year |
Underwriting profit/(loss) |
Combined Ratio |
|---|---|---|
|
2014 |
£3.2 billion |
88.1% |
|
2015 |
£2.1 billion |
90% |
|
2016 |
£500 million |
97.9% |
|
2017 |
(£3.4 billion) |
114% |
|
2018 |
(£1 billion) |
104.5% |
|
2019 |
(£300 million) |
102.1% |
|
2020 |
(£900 million) |
110.3% |
|
2021 |
£2.3 billion |
93.5% |
|
2022 |
£2.6 billion |
91.4% |
|
2023 |
£5.9 billion |
84% |
Lloyd’s has a US excess & surplus (E&S) market share of around 18%, as per Fitch.
Kerr is backing it for a growth surge over the next two to three years. His prediction comes as clients of US insurers and brokers contend with challenges including social inflation and the influence of natural catastrophes on a hard property market.
“The Lloyd’s market is about to come back in a big way,” Kerr said. “There’s so much underwriting talent and expertise in that market that hasn’t really been capitalized upon, and as things get a little more dicey and complicated, it’s going to be more and more important.”
Got a view on Novatae CEO Richard Kerr’s Lloyd’s plans and how well US insurance brokers have performed in their bids to branch out? Leave a comment below.
