Back to the future

John Welch is returning to reinsurance underwriting, at Aspen, at a time when the outlook for the industry is the best in decades. He tells Bermuda:Re+ILS why.

If the secret to comedy is timing, then John Welch should think about a second career in stand-up. He has very good timing.

The long-time AXA XL executive stepped down from his role running the company’s domestic markets for reinsurance in November, 2022, vowing to take some time off, travel and play golf.

By June 2023, he was in place at Aspen’s Stamford, Connecticut, offices taking up the reins as chief underwriting officer, reinsurance, just as the hardest reinsurance market in two decades showed real staying power.

Welch admits it is better to come into a hard market than the soft one that bedevilled the sector for the last six years, but says that was not why he joined Aspen.

Having begun in insurance as an actuary, he joined XL when it bought NAC Re and became chief actuary. Once there, he moved to underwriting and stayed with the company through the 2008 financial crisis, and then took over XL Catlin Re North America before XL was bought in turn by AXA.

After leaving AXA XL, he was approached by Aspen and was immediately interested because it reminded him of his earlier years at XL.

“XL had been many things over the years,” Welch recalls. “The time at XL that I enjoyed the most was prior to the Catlin merger, after which we essentially doubled in size. When I looked at the Aspen opportunity, the premium level, the size of the organisation, and the global capabilities were about the same.

“That was comfortable and attractive to me, and when I looked at where Aspen was, I felt it was large enough to be relevant, but small enough to be nimble. It had a flat management structure where you know all the decision-makers and could reach them quickly.

“That kind of environment got me thinking about the opportunity, and meeting the management team was fantastic. I enjoyed the conversations and now that I’ve worked here two months, I can say it’s exactly what I saw in the interview process—a culture of collaboration and teamwork.”

Welch says the other attraction of Aspen was that it was in good financial shape, having already gone through a de-risking exercise: “The results speak for themselves. Aspen had a very good 2022, which not everybody did. They had managed the catastrophe risk, so that wasn’t very problematic, but others could not say that. So far this year, the results have been excellent.

“I said: ‘I’m not going in to clean up challenged results, I’m going into something that’s already been re-underwritten’. They’ve implemented a new strategy and have de-risked. So coming in, it’s more: ‘how do we take this company forward’?”

“I don’t see the market suddenly softening after one year, I think it’ll be stable, barring unusual catastrophe activity.”

An attractive market

Welch says the opportunity was particularly attractive given the state of the market.

“I’ve been underwriting since the mid-2000s and this is as good as it’s been. I would say it is attractive across almost every line of business. There have been cycles over the years, where one line or another was looking quite good. But I haven’t seen this kind of across-the-board opportunity for many years, so the timing is very good to come back in and be part of that,” he explains.

Welch thinks the hard market has some way to run.

“The reinsurance market has not produced its cost of capital for many years,” he reflects. “I hope this will be one of those years, but it’s hard to imagine that one year will be enough, that the market will turn soft after one good year. There are just too many years of problematic results.

“On top of that, why are they problematic? You have, obviously, the loss trend issues and social inflation and the impact of climate change and all these secondary cats. Now we see wildfires in Hawaii.

“Throughout my time, certainly on the international side, I saw floods in Germany and hailstorms, and all sorts of weather activity that aren’t the peak risks that we spend a lot of time worrying about, but they chew into profitability.

“I don’t see the market suddenly softening after one year, I think it’ll be stable, barring unusual catastrophe activity. I don’t think we’ll see the same rate increases—the margins will be reasonably stable over the next few years.”

At Aspen, Welch says, there is room to grow on specialty lines with mortgage reinsurance and marine looking as possible growth areas. “A management of aggregation has to take place, but we think those two lines are priced quite well.

“In casualty, many of the lines look good although there is always the question of what is the right loss trend factor and what does that mean to the returns you’re expecting?” he concludes. 

“I’ve been underwriting since the mid-2000s and this is as good as it’s been.” John Welch, Aspen

John Welch is chief underwriting officer, reinsurance at Aspen. He can be contacted at: john.welch@aspen-re.com

Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.