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Insurance Executive

Six Questions for Michael Sillat

Ethos Specialty Insurance is launching into the competitive, but potentially lucrative program business as an MGA. R&I queried Michael Sillat, the CEO of this Ascot Group subsidiary, on his hopes for the launch.
By: | March 12, 2018 • 6 min read

R&I: The program business, as we know, is a growth area in insurance. Why are you enthused to be heading up an MGA in 2018 and beyond?

Michael Sillat: It is very much an opportune time to enter into the MGA space, especially if you can do so with some compelling advantages in terms of the business partners supporting such a venture. Ethos is a subsidiary of the Ascot Group Ltd. (AGL) which is owned by the Canada Pension Plan Investment Board (CPPIB). Ethos operates as a separate entity to the other AGL businesses, namely Ascot Underwriting Limited (Syndicate 1414 at Lloyd’s) and Ascot Reinsurance Company Ltd. (Bermuda), we have very strong capital backing and that’s quite important when you’re building out an underwriting infrastructure and need not only the time but also the resources to build that foundation properly and for scale.

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Ethos is independent and while we sit alongside the Ascot Syndicate and Ascot Re, we are not mandated to trade with each other, in fact, and Ethos was founded with the express intent of engaging third party capital providers for capacity, which we are doing today. That being said, when we are in the London marketplace or any of our carriers are seeking to buy reinsurance, we are happy to show either AGL entity the business just as we would any other capacity provider, whether it be directly or through the many intermediaries we have great relationships with.

R&I: What sectors or types of businesses are attractive to you from an underwriting perspective?

MS: The best way to answer that would be to look at what we have already built in terms of business units. Currently we are engaged in three verticals: M&A transactional Liability Insurance, E&S Primary, and Excess Property and Specialty Business. The M&A line is led by Navine Aggarwal, who has with him a team of 9 underwriters. This team is in the market writing R&W business and select specific tax liability and contingent liability products.

On the property side, we have a senior leader, Michael Carr. As Michael executes his property strategy, it will consist of a bifurcated approach between shared and layered and middle market business, written both on a primary and excess basis and covering myriad classes of property business.

Every one of our staff was chosen for a specific reason. They come from either a long standing career in the MGA world, or a successful career within the insurance carrier space, whether it be underwriting, actuarial experience or administration.

Our third business unit, headed by Joe Calise, focuses on a wide array of unique opportunities in the specialty sector. Products in this sector can range from niche single-peril or single-class products to large scale programs requiring specific underwriting expertise. When fully built out, this business unit will cater to a wide variety of products that will serve to address the “specialty” needs of our clients.

R&I: It’s an interesting time to be starting up any insurance business, with price increases starting to filter into the mix for the first time in a long time. How is the pricing dynamic influencing your thinking at this time?

MS: Pricing is no doubt an important component of underwriting, but we feel even more important is risk selection and the intelligence we utilize in allowing the underwriter to being as well informed about the risks being contemplated as possible. For this, technology and utilization of third party data is critical and something we have taken great advantage of.

Looking ahead, as prices fluctuate, we plan to be in lines of business where our infrastructure and underwriting strategy can produce profits in any pricing environment. To that end, if we feel a market is getting to a point where it isn’t sustainable and able to return the underwriting results we seek, then we will not waver in exiting that space. Conversely, when a market hardens, we will be there to provide capacity, and that’s important for our clients to know now and in the future.

All in all, however, we take a long-term view in terms of our pricing strategy and are pleased that as we enter into the market and start building books of business in 2018, we are well positioned in terms of the current market cycle supporting our underwriting efforts as we grow our portfolios.

R&I: One might conclude from the company’s name that you will be an E&S player. Can you help us understand how much admitted business you will be doing?

MS: Certainly, we are primarily engaging in the E&S sector as you can see from the products mentioned as we enter the market place. But by no means will that mean we will exclusively stay in that insurance sector. Our growth strategy is twofold: We will, on the one hand, seek to employ individuals and teams to build out an organic strategy pursuing lines of business we will have strategically decided to enter.

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While many of those could be in the E&S space, they don’t have to be. We could and likely will engage a line of business or an individual that will require an admitted market. That could be in the SME space or middle market space. On the other hand, the AGL group has an M&A team that focuses on potential acquisitions of MGAs. With few exceptions, we can consider MGAs from all walks of life, and as such, it could be quite possible that some of these MGAs deal in the admitted market.

Essentially, whether it be via organic growth or through acquisitions, we do see ourselves engaging in the standard markets as well as the E&S sector and are prepared in terms of our operating systems to handle that business just as much as we are already executing within the surplus lines arena.

R&I: What’s the biggest challenge you face in launching this business?

MS: Our biggest challenge is that we are a new MGA, and as such, we have to earn our way into the marketplace. That comes through taking the right amount of time and investing the required resources to build a strong and capable infrastructure. We have, today, completed that and are operative with a scalable underwriting and admin system as well as a team of senior leaders covering underwriting, actuarial, human resources and finance. Now, we need to earn the trust of our clients and execute a comprehensive marketing/PR strategy so that we can not only introduce our products to the marketplace but also identify the clients and capacity providers that we seek to partner with as we begin underwriting.

R&I: How do you feel your career prepared you for this moment? Why do you know in your gut that you’ll be successful?

MS: I direct your attention to the team that has been and continues to be assembled. Every one of our staff was chosen for a specific reason. They come from either a long standing career in the MGA world or a successful career within the insurance carrier space, whether it be underwriting, actuarial experience or administration. These are people that have seen the soft and hard market cycles; they make decisions that come from a wealth of experience; and most importantly, at Ethos, they foster a culture of “we,” and in doing so, our teams are constantly communicating and learning from each other’s specific skill sets.

In all my years in this business, if you can get that part right and bring the right people together, success is almost assured. &

More from Risk & Insurance

More from Risk & Insurance

Insurtech

Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”

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“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.

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“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?

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“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at riskletters.com.