High IQ: leading Bermuda’s new reinsurers


High IQ: leading Bermuda’s new reinsurers

Stephen Young, CEO, IQUW

IQUW launched in July last year with a clean balance sheet and a focus on a global portfolio, diversified by geography and segment. Stephen Young, CEO of IQUW Bermuda and head of IQUW’s global reinsurance business, outlines his strategy.

IQUW is part of the IQUW Group, alongside ERS, a specialist motor insurer. We have grown and diversified from a pure motor syndicate to become a global property and specialty insurance and reinsurance company, placing underwriting insight and analytical technology at our core.

We acquired Arcus Syndicate 1856 in November 2020 and Agora Syndicate 3268 in October 2021 to accelerate our growth strategy in a rising property market and position ourselves as a significant Lloyd’s carrier.

We have a very experienced reinsurance team, with Rene Lamer heading up reinsurance in Bermuda; Dan Warburg as head of reinsurance, London; Sarah Smith, international cat lead underwriter; and Ciaran Waters, US cat lead underwriter. We are continuing to build out our team in Bermuda. We currently have six team members, including Helen Thornton as Bermuda chief financial officer and group head of finance. We expect to add more underwriting roles in Bermuda in 2023.

“The plethora of recent events has dramatically reduced the profitability of our industry.”

Operating entities

In early 2021, IQUW Group capitalised a new Bermuda holding company along with two operating entities: IQUW Agency Bermuda and IQUW Re Bermuda. In the future, we will build a global reinsurance business from London and Bermuda, using Syndicate 1856 paper, IQUW Agency Bermuda coverholder paper and IQUW Re Bermuda.

IQUW has had the capability to write property and specialty reinsurance business from Bermuda through IQUW Agency Bermuda since early 2022. IQUW Re Bermuda currently provides Funds at Lloyd’s capital to Syndicates 218 and 1856.

Our reinsurance business includes a specialty portfolio, with aviation, marine, energy and cyber programmes, that is central to our growth strategy. It will allow us to thoughtfully continue to build our natural catastrophe re/insurance book. With this in mind, we will continue to grow our property-cat portfolio moderately with a focus on appropriate catastrophic attachment points at the one-in-10-year return period along with increased risk adjusted rates and limited peril coverage.

Our vision is to combine advanced data analytics with the best underwriting talent in order to create a re/insurance business that will be able to make consistent and accurate decisions and service our clients and brokers quickly. This data-led approach will lead to better outcomes by improving risk selection and structuring. It will allow us better insights into our cedants’ risk which will help their individual portfolios while increasing communication around pricing and structures.

We have complementary property insurance and reinsurance portfolios at IQUW. We have positioned our insurance business to write a primary property portfolio, to mitigate the effects of inflation. Property reinsurance is focused on US regional personal lines programmes and single country cat programmes outside the US with significantly higher attachment levels. Given the market conditions, we will continue to grow our property reinsurance portfolio moderately in London and Bermuda.

"We expect to see a return to the property-cat product being volatility-focused rather than attritional in nature."

Immediate plans

The immediate plans are preparing for January 1 renewals. The reinsurance industry’s return on capital and specifically property-cat reinsurance needs to improve. One of the biggest challenges facing the market in the lead up to the January renewal has been recent losses along with a very high inflation rate across many developed countries.

Over the last five years, we’ve seen major natural catastrophes and a rise in extreme weather, as well as a major pandemic and the conflict in Ukraine. These historic losses, inflation and climate change have all significantly impacted the reinsurance industry. Investors have struggled with the margins and returns on capital from the reinsurance industry over that period. In 2023, we expect a capacity shortage while demand is increasing for this valuable property-cat product.

Given these dynamics, we expect to see a return to the property-cat product being volatility-focused rather than attritional in nature. We expect to see real change in this market this year and anticipate dramatic risk-adjusted rate changes and significant structural and contract coverage provision adjustments within cat reinsurance programmes with attachment point increases and limited peril coverages in the future.

Future contracts may cover only a couple of specific perils, such as hurricane and earthquake, rather than the breadth of coverage that we currently provide. Recent losses have not all been caused by natural catastrophes—COVID-19, for example—and a few of them are from perils, such as wildfires, freezes and floods, and have produced significant losses.

The Bermuda market is responding to claims properly and appropriately, as the market has done for more than 30 years. However, the plethora of recent events has dramatically reduced the profitability of our industry and we need to ensure that we start turning that around for investors.

At IQUW, specialty lines are central to our growth strategy but this growth and diversification of our business allows us to build out, thoughtfully, our natural catastrophe re/insurance book.

IQUW is backed by private equity firms Aquiline and Abry Partners. Its lines of business include cargo, crisis management, political risk, cyber, property delegated authority, property D&F, directors & officers, energy, financial institutions, marine & energy, aviation, political violence & terrorism, war, property treaty (US and international), and specialty reinsurance.

IQUW, Stephen Young

Bermuda Re