Six Questions for Michael Sillat
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.
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.
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. &