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14 November 2017Re/insurance

Balancing tradition and innovation

"Our strategy is based on the value proposition that we create by constructing long-term relationships with our clients.”

Those are the words of Patrick Haveron, president of Maiden Re Bermuda. If there is one thing he stresses, it’s the need to build relationships that stand the test of time.

“That’s been the case in the US since our acquisition of GMAC Re in 2008, which means that parts of the company are more than 30 years old,” he says.

That said, the company is also moving with the times. It has joined a technology accelerator programme in Silicon Valley and invested in a cutting-edge insurtech product. Striking the right balance between innovation and tradition is the balancing act the company’s president must now walk for the company to be successful in what are changing times.

A long history

Maiden Re’s core business platform was first conceived of more than 30 years ago as Motors Re Management Corp, which ultimately expanded into GMAC Re. In 2007, Maiden Re was formed and enhanced the following year, through the transformative acquisition of GMAC Re by Maiden Holdings.

According to Haveron, such a depth of relationship has given Maiden Re a good insight into the challenges and opportunities faced by its small to mid-sized clients, and a proposition in that market with real franchise value.

He notes that the reinsurer can form very close relationships with its clients in ways that transcend any form of traditional reinsurance. For example, in the context of Solvency II coming into force in the EU, Maiden has devised a range of capital solutions products to help its clients, including subordinated debt, which can also help with their capital requirements under the regulatory regime.

“We have devised a number of initiatives around Solvency II as we knew that small to mid-sized companies needed greater access to capital,” Haveron explains. “Sometimes we do that through reinsurance, but Solvency II has also opened up other avenues, for example, forms of subordinated debt, which is treated as regulatory capital for Solvency II purposes.

“We think this gives us a unique perspective on the market, because we may be the only company that offers traditional and structured reinsurance products as well as subordinated debt. We’re quite optimistic about the avenues of opportunity it’s created for us. It’s given us multiple points of approach to the market that I think really differentiate Maiden Re.”

Haveron adds that Maiden Re is now seeing the benefits to that approach in its deal flow, both in the US and in Europe, despite the fact that market conditions remain very competitive. While losses from third quarter hurricanes will have an impact on property-catastrophe rates, the extent to which this changes competition in the non-cat market remains to be seen.

“We’ve also tried to be disciplined in our underwriting by taking a patient approach to the opportunities we see. We don’t just do transactions and reach for premium; we prefer to find opportunities and build relationships. We’ve been quite satisfied by our progress in Europe,” he says.

According to Haveron, the key to the reinsurer’s success has been identifying opportunities, targeting them and then applying Maiden Re’s unique approach to them.

“That’s been a very productive process for us but it also requires patience because the market, particularly in Europe, is very competitive. It means we will be well-positioned if there is any market dislocation by virtue of a big loss. We feel the work we’ve done here is good for long-term growth.”

Embracing innovation

Maiden Re isn’t just building on the past, however. It has been focusing on the insurtech space in recent years, and the company has joined a leading Silicon Valley accelerator that brings insurance companies together with entrepreneurs to help identify and support the most promising new technologies.

Haveron says that participating in this venture puts the company at the cutting edge of such innovations and also gives its clients exposure to the latest advancements.

Maiden Re continues to build new technological tools and improve existing ones. Drawing upon internal data, client data, and public and proprietary external sources, it has built predictive models that help clients better understand and visualise their risks.

The company has also participated in the latest fundraising round of Betterview, a software platform and service provider for capturing and analysing data from drones.

In September, Betterview closed a $2.05 million series seed round, bringing its total funding to $3.65 million to date.

The fundraising round was led by Compound Venture Capital, with participation from Maiden Re, 645 Ventures, Arab Angel, Winklevoss Capital, Chestnut Street Ventures, Pierre Valade, and Edward Lando, along with earlier investors Haystack and MetaProp.

The funds raised in the latest round are to be used to expand existing artificial intelligence capabilities, accelerate product development and increase adjusting, engineering and operations staff.

Betterview provides software and services that capture, organise, and analyse data for buildings and properties to unlock valuable insights. The company uses drones to capture highly detailed imagery, which it then processes and combines with other data sources to make every property thoroughly understood.

Haveron says the investment has allowed the reinsurer to create access to a new product for its clients while participating in an active way in the insurtech revolution.

“We’ve developed a product offering for our clients by partnering with the company,” he says. “A big focus of what we’re trying to do is to be more active in insurtech in a way that’s constructive for our clients, as well as our own portfolio more broadly.”

As Haveron points out, drones are an extremely useful tool in the claims box. They’ll never replace the professional judgement of a professional person, but they will help get information to that person.

“Our proposition is based on our relationships with our clients, how we can engage those relationships, whether it’s in insurtech, or in more day-to-day activities—we’re here to serve our clients and we think that our insurtech initiative is another area that will give us an edge.”

Proceed with caution

Looking at the current state of the market Haveron cautions that the sector needs to be careful about what the full impact of hurricanes Harvey and Irma will be.

He stresses that it is still early days on ascertaining the full impact of the two storms, and that Maiden Re does not have a big exposure to catastrophe business. It manages what it does have carefully in terms of occurrence and aggregate exposure to mitigate its losses in catastrophic events.

“Maiden will experience some loss activity from these events, but we believe they will be contained well within our published occurrence and aggregate exposure risk tolerances,” he says.

Haveron adds that it is too early to say whether rates across the industry will go up as a result of the storms. But he does expect a change especially if loss estimates increase over time. He suggests some industry loss estimates could be on the low side and that they might increase as more information comes in.

“It is too early to know whether rates will respond,” he comments. “Is it the game-changer that for example Irma could have been? The first indications suggest it is not, but I do think that it could add some firmness to the catastrophe rate environment.

“The thing we particularly don’t know is what segments of the market will be most impacted. Is it in traditional markets, both global and US? Is it in the ILS markets? There are certainly a number of observers who think that it will impact those markets at this point.

“Will there be any additional firmness beyond the catastrophe markets—it’s too early to tell.”

He concludes by saying that no matter what the final outcome of the storms, Maiden Re is well-positioned within the market.

“Even though we’re not a catastrophe player, historically we’ve benefited from a firming property-catastrophe market in our non-cat lines, because they generally create a window of rate firmness.

“Maiden Re is on a steady course at the moment. We continue to expand the value proposition we offer to clients, because we are not focused on cat markets, which historically tend to be pretty transactional.”