Navigators committed to wholesale distribution channel: Robinson
The new head of The Hartford’s specialty division used last week’s meeting of the wholesale market to reaffirm Navigators’ commitment to the wholesale channel, vowing to avoid repeating the sins of other specialty businesses that in the past had blurred the lines between retail and wholesale distribution channels.
Adrien Robinson, who replaced Navigators’ former head of specialty Vince Tizzio this past June, was speaking to this publication alongside Navigators’ head of wholesale, Michael Garrison, who recently joined from Allied World after prior stints at AIG, Starr and Benfield.
Navigators is a $3bn premium business, and its wholesale unit makes up about $1bn in premium.
When The Hartford acquired Navigators more than two years ago, there was concern among wholesale intermediaries that the possible blurring of lines between the retail and wholesale distribution channels – which was a more dominant market feature several years ago – would cannibalize wholesale brokers’ business with the underwriter.
“Many times when a standard lines company buys a specialty insurer, there's always the perception that something's going to fumble or muddy the distribution,” Robinson said.
He said that even though a standard lines carrier had bought the business, he and his colleagues in the specialty operations were “purists”.
“We're not going to mishandle wholesale distribution like some of our competitors have in the past,” Robinson explained. “We haven't done that and we’re over two and a half years in, but we're still sort of combating that perception.”
Robinson further added that Garrison’s wholesale division was staffed with underwriters who “eat, sleep and breathe E&S and wholesale all day long”.
“That’s all they do,” he said.
Navigators planning second biggest recruiting drive in over a decade
As the executives aim to grow the business, Robinson said the Navigators division was gearing up to add staff in the coming year, which he described as the “second biggest influx of intellectual capital” the group has had in more than a decade.
Robinson acknowledged the difficulty in adding talent in the current job market but said its recruiting drive involved some “creative” plans to build out resources both with frontline underwriting talent as well as growing headcount underwriting and IT support.
The efforts, he said, were aimed at giving the business more agility, but also at addressing “the influx of new exposures coming into our society right now”, which has contributed to the torrent of premium volume hitting the E&S market.
“Technology is creating new products and new exposures faster than the admitted markets can handle it. That's why all this business is flowing into the E&S space,” he said. “That's where the wholesale broker shines, and we want to support that.”
To that end, beyond underwriting staff, Robinson said the company would focus on recruiting staff with skills that sit between the traditional IT and underwriting arenas, who can help “take projects off the desks of underwriters”, in a bid to boost underwriting productivity.
“I used to talk about the war and battles being waged on the underwriter’s desk,” Robinson said. “Now I believe the battle is being waged on the underwriter’s desk, but the war is going to be waged and won in the IT department.”
The executive further explained that being a part of The Hartford – a larger company with a much larger volume of data – had also helped accelerate the specialty division’s ability to apply data analysis to its underwriting.
“That's becoming a huge advantage for us,” Robinson said. “We've already set up about almost two dozen data science models operating inside our business over the last 12 months.”
“That already touches about a third of our business,” he explained. Robinson went on to say that in the next 18 to 24 months, he expects the division to have two-thirds of its business operating with multiple data science models for each line of business.
Rising risk brings opportunity
Discussing his division’s growth potential, Robinson said that market disruption and an elevated risk environment had created “lots of opportunity” for growth.
“You underwrite a light bulb for the first 200 years, and it was a light bulb. Now it's an IoT connected device, interacting with the other systems in your house, and it's got maybe a camera on it and there's all kinds of cyber exposure related to it now.”
“If you're a specialist underwriter, all of these societal [changes] create opportunity, whether it's social inflation or climate change,” he said. “That's opportunity.”
Robinson went on to say that the market has been “disciplined” and “responsible” during the recent turn in the cycle, but that the same level of societal change generating new opportunity was also a reason for caution.
“When you're writing a long-tail business and we're talking about some of those societal trends, it is very difficult to realize how they play out six to eight years from now,” he explained. “We have to be judicious. I wouldn't want to run into the market and write a bunch of business by cutting rates.”
The executive said underwriting profitability across the industry was “in good shape” but some uncertainty over the movement of loss trends warranted additional care.
“We think rate achievement is at or above what we believe is current loss trend, but we've been chasing trend in auto for a decade now or more, and still never quite get there.”
“Now we're facing another new piece of inflationary trend for auto where we can't get parts to fix vehicles, [causing] pricing for used cars to go through the roof. So now there's a whole other part of trend that we're chasing.”
Robinson added that while the underwriting environment looked attractive and the company aimed to grow, there were “enough unknowns” in the market for the industry to grow volumes with caution.
“It needs to be thoughtful growth,” he said.
Navigators plans to ‘eat more of its own cooking’
On the topic of reinsurance, Robinson said the business would look to mostly keep its treaty structures intact, but that with the improvements in profitability, the group would also look to retain more risk incrementally.
“I think we can keep a little more and manage a slightly less tail risk,” he said. But the executive was also mindful of managing trading relationships over the course of the cycle. “We want to be a partner and treat them like we would want any insured to treat us.”
“We don't want to make wholesale changes, because we want partners when the pricing environment isn’t so good as well.”