Ascot Bermuda’s Thompson: ‘We’ve put our foot to the floor’ on growth
In a casualty market where capacity has pulled back and rates have accelerated, new Ascot Bermuda CEO Ian Thompson has deemed the current market opportunity “unprecedented”, telling this publication that companies with limited legacy exposure such as his were poised to thrive.
In an interview with this publication, the executive said improvements in analytics would sharpen market discipline through the cycle and that he expected the upswing in long-tail lines to last longer than in previous cycles.
“We've had significant growth over the last couple of years – however, not prior to this, and that's deliberate,” he said.
Ascot more than doubled its Bermuda writings in 2020, to $520mn, and has projected that it would grow its book by 20% in 2021.
“Like certain other players, we've put our foot to the floor – particularly in casualty – because we are in an unprecedented market,” he said, adding that he believed conditions for underwriters were stronger than they were 20 years ago.
“It's going to last longer, as well.”
Earlier this year, Bermuda (re)insurers Arch and Everest revealed they had boosted their top lines in P&C by 31% and 15%, respectively, as underwriters seek to pounce on what some view as a finite window to create long-term value.
“If you think about where the bottom of the soft market was, it was probably only 18 months ago,” Thompson said. “There's a lot of pain to come out from 2016, ’17, ‘18, which won't have manifested itself yet. You're going to continue to see carriers exit classes, have reserve deficiencies, and we're going to be in a position to take advantage.”
News of significant reserve charges has picked up in recent months, with fellow Bermudians Everest Re, Third Point Re and James River all increasing prior-year loss estimates within their fourth-quarter results.
The executive’s comments also come as brokers and underwriters alike anticipate rate increases in long-tail lines to last through year-end, as the combination of elevated loss activity and the legacy of soft-market pricing keeps capacity tight.
According to Thompson, underwriters are now better positioned to time the market and react with greater discipline than in previous cycles, thanks to advancements in analytics.
“If I look back to the techniques we employed back then,” he said of the market two decades ago, “they were fairly rudimentary. I think we [as an industry] will be better at going harder, faster, and also know when the right time to pull back is.
“The clichéd mistakes of the past about not writing enough, getting out too soon – I think markets will be better this time because the analytics are there to support it.”
Thompson took over as CEO for the London-based insurance group’s Bermuda operation, ascending to the role following the retirement of industry veteran John Berger. His promotion is one of myriad changes at Ascot since last June, when former Everest Insurance CEO Jonathan Zaffino joined as group president.
Former Arch executive Matt Kramer was also tapped to lead the company’s US business in January.
The Bermuda business has made a push to grow its casualty and specialty reinsurance book, which Thompson said had already borne fruit with new and expanded relationships with national carriers, where he said underlying rate improvements had been strongest. Still, he was emphatic that his company wasn’t simply being opportunistic.
“I don't want to suggest we're in and out – we've never been that sort of a market,” he said.
“If the underwriting performance persists and we see the market dynamics sustain, then we will hang on to it. When you get into a casualty treaty relationship, or a specialty treaty relationship, you're not doing it for a year or two years, by definition.”
Brokers and reinsurers described a January 1 reinsurance renewal in which rate increases were more moderate than initially expected, and ceding commissions rose on deals where there had been significant rate gains. “We're not frightened of significant cedes, if the economics make sense,” Thompson said.
He flagged cyber and commercial auto as two classes of business where the company was especially cautious but noted that “pretty much everything else is in scope”. The company has also moved beyond a focus on monoline deals and has been doing more business that includes a mix of classes.
“I want us to always look at a deal and think, ‘how can I structure something that works here?’ ‘What is the right price?’ ‘Let's deliver something for somebody they can't get elsewhere.’ I want us to have that mentality because that's who we are at Ascot, and it’s a huge advantage and keeps the phone ringing.”