Towards an open culture
In the past few years the reinsurance market has been affected by steadily softening rates, with mergers and acquisitions (M&A) increasing as the market tries to cope, while hoping for an upturn in rates. It’s been described as the ‘new normal’, with some perhaps expecting that life would return to the ‘old normal’ at some point.
However, according to Kathleen Reardon, chief executive officer of Hamilton Re the reinsurance market’s ‘new normal’ has become the actual normal.
“I think we can retire the use of ‘hard’ and ‘soft’ descriptors, because this marketplace is forcing clients and reinsurers to change their business models in real time,” Reardon says.
“There are also some pockets of opportunities—we’ve seen some rate rises in property direct & facultative and excess casualty insurance. Insurance-linked securities (ILS) has been cemented as a durable force—I would even go as far as to say that ILS is helping to change the landscape—and it’s reshaping the industry dynamic.
“That’s going to be evident with what AIG and Markel are doing.”
Reardon stresses that underwriting discipline trumps everything—something that hasn’t changed in the market, and those who get that right at the January 1 renewals will be successful.
She adds that ILS capacity has grown and Hamilton Re sees that continuing, but she doesn’t see it ending the traditional model, because there’s always going to be a place for traditional capital.
“What’s interesting now is the question of whether the independent ILS model is changing, as firms such as Nephila become at the very least associated with a traditional market player. This is happening especially in Bermuda, which has always been a place that influences the market dynamic,” she says.
Reardon thinks that ILS will broaden, with additional classes of business, but there will always be a place for the traditional player, as there is always new risk.
A strong start
Looking at where Hamilton Re is positioned in the market, she says: “We were built for this market—we were born in a soft market, so by design we’re lean, nimble, client-centric, deliberately leveraging data science and technology.
“We don’t have legacy systems or culture, so we’re in a good place there. For such a short tenure we now have a very impressive list of market clients, we’ve built the franchise value by being passionate, responsive, and giving clients what they want, such as multiline coverage. We can build on that.
“People want to work for Hamilton Re—we’re a talent magnet. People are interested in what we’re doing, what we’re building. As M&A affect the incumbents the market looks to us and the new lines of business we’re building with that new talent; we’re adding a new line of business for January 1, 2019.”
Hamilton Re’s brand is being built not just in the industry, but also outside, as the company is using outside companies for technology and recruitment.
As a result, Reardon says, Hamilton Re is creating what a successful incumbent would be building if it started today: using data science, technology and what she describes as “getting the underwriters’ heads out of the weeds” so that they can think of more solutions for the client.
“We are deliberately building a culture that is open and collaborative, and not letting it happen by accident,” says Reardon.
“Every voice is heard, we have an open floorplan. I sit in the middle and we’re enabling and empowering everyone. Right next to the underwriters are the data scientists, who are challenging those underwriters, asking them why they do what they do.
“Sometimes the answer is not that compelling because it’s on the lines of ‘we’ve always done it that way’. Then the answer from the data scientists is ‘I can automate that’.”
One example of automation is in Hamilton Re’s property direct & facultative line, where the company has automated the data-structuring aspect. Submissions come in all different formats and automation has taken days off the projects.
According to Reardon, Hamilton Re has built a database that has a main memory algorithm for all its treaties, so it’s a risk-on-risk aggregator.
“We write the treaty business, we write the insurance business, but underlying is the original insurance,” says Reardon.
“In many submissions the names are coded differently—it’s not like there’s a ticker symbol that’s a constant, not in the insurance industry, where nomenclature can be inconsistent. That algorithm has a very robust database, so if a loss does happen then we have a much better picture of that loss.”
Reardon explains that Hamilton Re’s culture makes sense to people who want to write the future of risk. The company has built Hamilton risk platforms and deal management systems for its clients so they can handle additional balance sheets and geographies.
While Reardon admits that Hamilton Re is a relatively new company she stresses that it has a lot of experienced people who have seen the entire underwriting process done in many different ways and have come up with ideas for how to do it better.
“We’re deliberately building something that doesn’t have legacy issues,” she concludes.