色多多视频has brought together its primary and excess casualty insurance groups with the goal of building and sustaining deeper and more strategic relationships with brokers and clients. Donnacha Smyth, Chief Underwriting Officer, Casualty, Americas, leads this newly combined group and discusses why the company made the change, how data and technology is helping to refine the company’s underwriting approach and what brokers and clients can expect going forward.
FFF: Donnacha, what's driving the casualty market today?
D: The casualty market as we think about today encompasses workers compensation, primary general and auto liability, umbrella and excess casualty and also our multinational offering for our clients. If I break those down into their component parts, the primary market continues to be relatively predictable and competitive. In an environment of higher-than-average interest rates with the predictability in losses, I think that feeds competition. There are carriers that can write that business at or close to a 100% combined ratio, or at least at a level to make money up on the investment income.
Even within those components, it’s challenging. I think it’s widely known that commercial auto continues to be problematic for the insurance industry. And that has really emerged even as we came out of the pandemic, when clearly mileage was down but severity was up. And now frequency is up in the auto space. So auto continues to be an area of challenge, and I think carriers will continue to push for rate increases on the auto side of their books.
So, that’s a challenge that our customers need to be aware of. Likewise, in general liability we are seeing a rising frequency of product-driven exposures. They’re all quite manageable, because the limit profile of primary hasn’t changed significantly over the last few years.
Probably the biggest challenge continues to be in the umbrella and in the working layers of excess. Historically umbrella was not meant to be a working layer. It was meant to cover you for that infrequent, severe loss that has a vertical nature to it. But I think what we’ve seen with the frequency of auto losses and product losses or general liability losses – I’m thinking of a big railroad loss or an explosion or a wildfire – they have the ability to go vertical quickly, which makes the predictability of excess very challenging. Excess is always a volatile layer, but it’s even more so today given the outsized jury awards that we see continuing to happen throughout the country.
We are also piloting a client portal where clients will be able to manage their overall international exposures – a one-stop shop around their policies, their premium flow and their claims.
色多多视频has recently made changes in the way it approaches casualty insurance. What has changed?
Historically, we were a very product-driven company. Therefore, each product stood on its own profit and loss, and that led to a mentality of being siloed. We had our primary casualty offering and our excess casualty offering led by separate leaders, and each would create their own strategy around trying to ensure that the product achieved its growth targets and its profitability targets. Even though we’ve always worked well together, the appetites diverge somewhat. Primary may be interested in writing a large workers comp deal, but that deal might have a significant auto fleet exposure. They may not want the auto risk, or require an umbrella and excess offering to support, and the excess team may not want to write a large auto fleet.
Our most recent reorganization is trying to bring our products, which we believe are independently profitable, together for the purposes of offering a more cohesive offering to our clients and our customers. We are trying to take a more holistic client view with the suite of products that casualty will encompass and trying to design products that I believe should be more sustainable and resilient for the clients going forward. In this way, we can manage the market cycle for our clients better with more predictability. Otherwise, it’s more of a transactional relationship, and then you’re at the vagaries of the market. If the market has a knee-jerk reaction to a worsening loss environment, suddenly there is uncertainty about the capacity that you’re going to get and the price you’ll charge for it. So, I think it’s going to create a much more strategic relationship with our clients over a longer time.
How can AXA XL’s multinational accounts benefit from a more client-focused approach and casualty and other insurance lines?
Overall, we’re underweight in our casualty offering. Given the global nature of our business and our global capabilities, we don’t push our multinational casualty offering as effectively as our competitors. We have the systems and the capabilities to be able to compete with the top three multinational writers, but we don’t do it effectively today. That’s really a hangover of being siloed within products. I think there’s an educational element to our distribution and other product and international colleagues, and we will develop specific growth strategies in this area.
I also believe we need to be braver and push that capability every time we touch a client, no matter what that product is. We should be educating them as to our capabilities and looking for ways to partner with them on our multinational and other offerings and help them manage their overall cost of risk.
We are also piloting a client portal where clients will be able to manage their overall international exposures – a one-stop shop around their policies, their premium flow and their claims. This enhancement to our offering should make us even more attractive for our clients to work with. I think we can promote our casualty offering much more broadly than we do today.
How are you harnessing data and technology in your underwriting?
We have created a suite of data-driven tools that helps us identify accounts using non-traditional underwriting metrics that help us focus on clients that better align with our business appetite. In other words, when we ask to see the business and we get that business in the door, we’re much more likely to write it.
We’ve had problems in the past where our broker will say to us, “What do you want to see?” We’ve got a very broad appetite, and respond, “Well, show us everything.” That’s not strategic. We confuse our brokers, and we don’t differentiate ourselves.
But now we’re doing a lot of work up front to say to the broker, “We know you’ve got these 80 accounts, but we really want to look at these 10. And if you show them to us, we're going to really try to write them.” And I think our hit ratios on those will be much better than them just sending in accounts, not sure where we’re going to play on them.
What do you want brokers and clients to think about working with 色多多视频a year from now, after all the changes the company has implemented?
We believe firmly that there’s a benefit to aligning our overall product – primary and casualty and multi-national – focusing on our clients, thinking about our clients holistically. My vision for casualty is that we’re going to align our excess offering with our primary offering –there will still be business we write in excess that we don’t do in primary, and vice versa. But I think what we’re going to do is have an educated workforce that understands our capabilities. If you’re a primary underwriter, you’ll know what our appetite is in excess, and if you’re an excess underwriter, you’ll know what our appetite is in primary.
In the first few weeks of bringing this product together, we’re breaking the silo down so that each side understands the capabilities. We’re going to undertake a body of work to fine tune that appetite so that we know where we really align, where we will win better together.
We want to create a much more strategic non-transactional engagement with the client, understanding that economics are economics and that there’ll always be a price point the client won’t want to pay or a broker will have responsibility to suggest that they shouldn’t pay. But I’d really like to see us developing a pipeline of accounts, both existing and new prospects, for both sides of the house where we’re engaging with those clients in a much more meaningful way, talking about the whole suite of products and services that we can offer that can withstand the market cycle.
So, it’s the intentional portfolio that I would like to see our casualty underwriters build as opposed to transacting business with whatever the brokers are taking into the marketplace. We've developed some really good data-driven tools which will help us decide what are the characteristics of an account that we believe will be more profitable than average and that will want to maintain a long-standing relationship with us. And if we can get those two things together, I think we’ll start to intentionally build a portfolio rather than just transact a portfolio through the market cycles. We’ll try to dampen the market cycle down, knowing that things happen that are outside of our control, and build a much more resilient portfolio of business that will be much stickier to our organization going forward.
