Conversations at PLUS. Nine questions for Jeff Kulikowski of Westfield Specialty

At the PLUS Conference in Chicago this November, Dan Reynolds, the editor-in-chief of Risk & Insurance, caught up with Jeff Kulikowski, Executive Vice President for Cyber and Professional Liability with Westfield Specialty. What follows is a transcript of that discussion, edited for length and clarity.

Risk & Insurance: We understand you’re excited about a new wholesale platform launch. Can you share some details?

Jeff Kulikowski: Westfield Specialty is building out wholesale platforms in our professional lines and financial lines, most recently in the E&O and cyber team. The wholesale vertical will have unique products that are separate and distinct from our retail products.

We will have a separate underwriting team and a different operating structure. This is to serve the needs of our wholesale distribution brokers, especially during this transition phase in the cyber and professional liability markets as we move away from harder market conditions.

The three pillars of our approach are separate and distinct products, separate and distinct underwriting and underwriting appetites, and a different operating model. We are tailoring these to match the needs of the wholesale channel, which are quite different from retail.

R&I: How does the state of the admitted markets impact the excess and surplus (E&S) market, particularly in the context of complex risks like cyber?

JK: In the admitted market, insurers must navigate the regulations of all 50 states, which can vary significantly in terms of rates, coverage, and other factors.

In contrast, the E&S market provides the freedom of form, pricing, and coverage, making it an ideal place to handle difficult and complex risks. As cyber risks continue to evolve and become more intricate, the E&S market allows insurers to adapt their policies and underwriting to meet the changing needs of insureds.

Working with specialized wholesalers in the cyber and errors and omissions (E&O) space is exciting because it enables the development of products and capabilities for clients who need them most. While standard risks are important, the real excitement for experienced underwriters lies in tackling the tougher, more complex risks and collaborating with brokers to overcome challenges.

R&I: What is the current status of the platform launch, and when is the official launch date?

JK: The official launch date for the platform is January 1st. We’ve been building it since around August of this year, and we’re nearly done. All our underwriters are assigned, and the appetite is fully defined.

We’re just waiting for the final pieces to come together in the next couple of weeks. Once that’s done, we’ll be ready for the official launch on the 1st of January.

R&I: How are you aligning your talent to best serve this new platform?

JK: We operate a dual distribution platform, which means we already have a presence in the wholesale space. However, we recognize that we need to commit more resources to this area because wholesale brokers and their clients have different needs compared to our retail brokers.

We have staffed this initiative with experienced underwriters familiar with the needs of the wholesale market. We have only one chance to do this correctly, so we are dedicating not just underwriters but also product resources to continuously meet the needs of these wholesalers.

This calculated allocation of resources will allow us to execute this initiative effectively and efficiently.

R&I: What is the most challenging aspect of launching this new platform?

JK: Our approach is unique in that we aim to specify classes of business and have a separate, broader underwriting appetite for wholesale due to the challenging risks they often encounter.

The process involves thoroughly examining the appetite and determining which industries are currently served by our wholesale model, and then allocating our resources accordingly to support our wholesalers. It is a challenging task.

R&I: What advice would you give insureds about their cyber risk and coverage approach, considering the volatility in the cyber insurance market?

JK: Cyber is volatile on both the underwriting side and in terms of predicting future events based on historical losses. So much of the market’s underwriting approach is based on knowledge and research on current events and techniques used by bad actors, which involves a lot of guesswork.

My advice for insureds is to play the long game. Find a broker and a carrier with an appetite to navigate all types of conditions, not just an opportunistic carrier jumping into cyber when rates are favorable. Look for individuals on the underwriting staff with extensive experience and a reputation for consistency.

As an insured, you must accept that cyber coverage is a gray area that can touch many different areas of insurance. These policies are broad in context, so it takes a lot of collaboration with your carriers and brokers to handle complex claims. You want to work with someone who has standing in the space and understands what they’re doing.

Beyond taking the long approach, be patient with market conditions and ensure your carrier explains their pricing rationale. Understanding what drives your carrier’s appetite will enable you to establish  a long-term relationship. Be patient as regulations develop and underwriters navigate the complexities of assessing your risk. In many cases, we’re learning alongside you.

R&I: Do you think insureds understand the importance of long-term relationships with their insurers, or are they still primarily focused on price?

JK: It depends on the company and their risk mitigation strategy. Many clients view insurance as a transaction, but it’s meant to be a long-term collaboration. Insurance policies are not priced to sustain losses every few years; some are priced for events that occur once in 20, 100, or even 500 years.

My advice is always to work with a carrier if you’ve had a good claim experience and have built a relationship with them. While we’re winning a lot of business, when a company tells us they’ve been with their current insurer for many years and that relationship works, we respect that. However, we still ask to be included in their insurance tower in case their current insurer falls short.

R&I: What trends are you observing in the professional liability market based on your conversations here at PLUS?

JK: The professional and management liability market is at a crossroads. In the D&O space, there’s abundant capacity, and the litigation landscape is somewhat uncertain due to factors like interest rate issues and a new President coming in. These potential changes make it challenging for carriers to differentiate themselves.

Similar trends are evident in the financial institutions and cyber insurance markets, where an influx of capacity is occurring. Attendees at PLUS are focused on marketing their offerings and highlighting their unique value propositions amidst this competitive landscape.

There’s a sense of anticipation, as if everyone is waiting for the next significant development. Our strategy at Westfield Specialty is long-term, focusing on growth in products, people, and other areas. In the coming years, it will become apparent which carriers are genuinely committed to the market for the long haul.

I’m hearing a lot of talk about growth, but not necessarily about profitable growth. While growth is excellent for acquisitions and immediate returns, insurance is a long-term game. Despite the increased capacity and stabilizing markets, many carriers are still struggling to differentiate and brand themselves effectively.

As a buyer, this is an advantageous period following sustained hard markets in D&O, financial institutions, and cyber insurance. However, the abundance of capacity presents challenges for carriers seeking to stand out in the crowd.

R&I: Is there anything else about the wholesale platform that you’d like to discuss that we haven’t covered?

JK: We’re very excited to create these products for our wholesale brokers. We feel that this is the perfect time to innovate and over-service the space.

We want to find ways to create sustainability in the wholesale model. However we can help bring that to fruition, we’re thrilled about it. &