John, welcome back to the Voice of Insurance.
John Fowle
Thank you, mark. Lovely to be With you again
Mark Geoghegan
It's probably been a couple of years since we last spoke.
But you've been in this new role for About a year.
So you've surveyed the landscape of your new role. Have you got any strategic priorities and the things that you want to be getting on with?
I knew by reputation and as a peer and competitor, as we tend to in the London market and.
Everything I found here was aligned to what I expected, which really centres around very, very high quality delivery of underwriting and claims. So that's great and that's lovely.
In terms of strategy going forward, what we've really been working on is getting organised around what is it that makes atrium distinct? What makes atrium a bit special, what has allowed atrium to create such a strong track record of results and then?
Do we build on that? How do we do more of what we're good at? I'm a great personal proponent of focusing more on doing more of what you're good at than trying to do lots of other.
So that delivering proper specialty insurance underwriting.
The brokers and the clients, our strategies are all about doing more of that consistently and better overtime.
00:03:11 Mark Geoghegan
Does that mean expansion more lines, more geographies, that kind of thing?
00:03:15 John Fowle
No, not really. I mean, if you think of geographies in terms of where you have offices for us, it's pretty simple. We're very much a London organisation with one service.
Office in the US, which services the business that's under in in London.
And and then again, maybe like a lot of London market specialty shops, our portfolio is global anyway, but that London market ecosystem works phenomenally well for specialty lines underwriters. It just does because London has got that magnet for specialty business. Lloyds always has had that.
And we find that that infrastructure works really well for us. It works well for us in terms of being a place that the brokers want to bring business and do business. And then obviously the actual Lloyds mechanism that allows your capital providers to engage in a certain way. And in our case, a very consistent group of capital providers over many decades, that all works well.
As well, so I haven't been tempted to start trying to convince my agent colleagues that we should be globally expanding or anything like that. That doesn't seem to make sense for.
00:04:21 Mark Geoghegan
Business say doing more of what you're doing and what you're good at, but it might mean adjacent lines, that kind of thing. I often get the impression sometimes looking outside at atrium that it's a sort of business where you go people first and then you've once you've found a person that you think would be very good that you already know by reputation to be very good in the marketplace in terms of an underwriter it seems to be that you go with the underwriter first rather than anything else.
00:04:46 John Fowle
I think that's absolutely on a theme that Atrium's got this long history of being a home for very fine underwriters where it has been disciplined, I think is in saying yes, but that only really works in specialty lines. It hasn't got too carried away.
And it's sought out particular types of underwriters and underwriting teams. And then just on the classic thing of saying so, what else needs to be true for you to be market beating, you know, a top quartile performer in those areas. And again, that's not a difficult model, is it? You know, you've got to match it up with really good support services. Excellent claims adjustment because you're typically putting yourself out there as a lead because that's the differentiator.
That's the reason the brokers come to you is cause your problem solving. That means you need to be able to back it up with fantastic claims Adjustment and then you need to be really easy to deal with on compliance.
You need to not be getting your brokers stuck in mud because stuff gets lost in your compliance department for months and nature's always been very good at that. And that's as I say, as a peer, that's what I saw demonstrated in the mould enough for that to be quite a long memory. But to your first part of that question, yeah, I think where we feel we can take that Understanding of what good looks like.
And go into new areas where we think there's a real need where we think we can bring in or develop real knowledge and expertise that frankly our customers, the brokers actually care that we're delivering it. So we're not just rushing into a very busy party where there's already too many people.
I think that's a real opportunity for us because that's if you like, that's just leveraging a core capability, as they say, which is the ability to manage specialty underwriters.
00:06:30 Mark Geoghegan
So probably in middle of budgeting season right now or it's certainly in this part of London, it's always budgeting season one way or another. And when you're looking out over that where you most encouraged at the moment, you're seeing the most opportunities.
00:06:42 John Fowle
I think that's an interesting question. I think we're now at that stage in the market. So we've had a few years where sort of everything's been going in the right direction on rate.
And then it's really just been about different underwriting or different syndicates appetite to be very aggressive or less aggressive or do a bit of Good Housekeeping mending the roof while the sun shining all these different things. I think we're now at an interesting point where rate has stabilised in a few cases dropped off.
But that really allows you to focus on longer term aspirations of classes where you think you have a sustainability in those classes.
It also allows you to think about ways of approaching underwriting now for us where we do know what we're doing, there's an ability to be a bit bolder, particularly looking at the lead follow concepts and where that really works for us, where we really are a valuable leader and how to make that work for us and make that work.
The broker in a more efficient way. And then the last point on that really is forward and thinking about innovating and the new new, which is where can we think our way through issues and gaps and insurance product and use the IP that sits in them to develop really new ideas. I mean Atrium's been.
Quietly. Really good at that. It's always innovative within its lines of business, but it's also been very involved in some genuine innovative products, but in a rather classically ancient way, in a quite understated way. And I think I'd like to get a little bit more public about our willingness and our capability to do that.
And also put a bit more resource to it so we can effectively industrialise that a little bit more rather than it being stuff that our team are just trying to do while they're trying to do everything else, try and find a way to make that a kind of distinct offering.
00:09:47 Mark Geoghegan
Yeah. When you talk about leveraging lead follow is it, things like, you know, if you're a leader, then perhaps opening yourself up to leading a consortium, something where you can give yourself more clout in the marketplace. So you know, give that broker better solution straight away and line up some of that flow capacity almost behind yourselves.
There's definitely a two way St there isn't there, and I think more and more.
People in the market, in our classic subscription market are getting their head around this that there is very little to be gained.
And in just joining the herd and setting yourself up as a leader when, frankly you're really not and to your point, the brokers aren't really gonna give you the credibility there.
00:10:29 Mark Geoghegan
The broker's gonna tell you where they're
John Fowle
Yeah. And they get and you know they have a job to do. So you know, if if people set themselves up as a leader.
And then maybe don't understand everything that they need to in order to be a genuinely good and sustainable leader. Then the brokers will need to use their capacity, but what the brokers are actually typically far more interested in is delivering good solutions to their clients.
In a really efficient way, and that's to your point. That's we're consortium where other forms of lead follow mechanism work extremely well because they want to get the business price properly. They want the coverage to be spoked appropriately for their clients needs. They want to make sure that they are doing that appropriately. So they definitely need to be able to speak to.
The number of leaders, but once that bits done, they really just want the most.
Way to fill out the placement so working out where you fit in that class by class I think is important. Now. That's a number of classes where HM would definitively be one of those leaders and we should be maximising that frankly. But there are also ones that we've done a lot of work over the last 12 months at being sensible to say.
Well, where there are classes where that's not us, who is that underwriter and how do we support them? And we like that model because we think by applying.
A different underwriting skill set that is far more due diligence around who is good at this. You can complement your core classes with some profitable business following other people. And I just think that trend that's been developing for a while in the market I think and hope that that will continue because it's a bit of a win win.
It's a win for the brokers because more efficient and it's actually a definite win for the participants in the market, the underwriters and.
Back to the point, it's good for the brokers, so why wouldn't we all try and just get that organised well?
00:12:20 Mark Geoghegan
That's interesting here because I talked to some people who say, well, no, we're just a leader. We know we like to lead everything we do. But it's interesting to say that there's also legitimate skill in being a good follower and being effective, almost like a fund manager on that sense of being a good stock picker and saying, well, which of the horses should I be backing within this race, especially if I can't beat them? Why shouldn't I join them and benefit from their experience?
And also learn a huge amount about that class of business as well. And hopefully while I'm making. Plenty of profit, yes.
00:12:47 John Fowle
Yet some version of that works well, doesn't it? You know, in other sectors, people talk about alpha versus beta etcetera, but it gets quite specific in.
Our world, I mean, it's always been true that even within, let's say what one might consider a class specific business lends itself to specific leaders and then even the other leaders in the market would acknowledge that those are the syndicates, those 3 or 4 syndicates are really good at that stuff. So they're happy to follow. Doesn't mean they don't have to do some underwriting.
That they would happily follow those leaders more pure lead and follow version is where you actually.
Say I'm not going to try and do that, I'm just going to try and back the right people and I think if the market does that, we will all be a little bit better off and it also might maintain this discipline where you won't get so many people doing crazy things.
That will drag the result down and damage the potential sustainability of the market as a whole.
00:13:40 Mark Geoghegan
Once the brokers got the back of the thing broken, they really don't want to spend any old fashioned shoe leather and any other expense on getting the thing finished. For example, had InsurX on the programme in a recent podcast was I found it really interesting cause often with the platform like that, the thing that would make it not work has been that the broker won't use it and therefore will effectively.
Kill it by not using it. What was most interesting about the tricks was that it was broker driven this time, which is very bullish thing to see that it's the broker is recognising.
That there is an efficiency to be gained here by getting something done quickly and not having to broke sort of 20 times something that you can broke from just two or three prime markets.
00:14:21 John Fowle
Yeah. And we're very closely aligned with InsurX, particularly on the market property business, because that's a role we play in that. But we're going to do what we're going to do anyway. I.e., we're going to see as much business as possible.
We're going to try and put terms on the business that we think we can write and we've got a very good reputation on that side, but actually.
Other people being able to automatically support that works really well for the broker and it doesn't do us any harm because effective to your point earlier, that sort of effect it has for the broker as they know that if atrium quote X and it's bindable, if it's if it gets a firm order then they automatically have additional capacity. So it sort of puts an additional weight.
To our quote terms and I just think it's an idiosyncrasy of the subscription market, isn't it? We do a lot of business on this basis of well I like this and I think I know the right price and this is the layer, but I still only wanna write 15% of it. So a mechanism that turns that 15 Into 50 is fantastic for the broker.
00:15:21 Mark Geoghegan
And how's that experience been so far in terms of any of that automatic follow type underwriting?
00:15:27 John Fowle
I mean really positive, very positive on the insurer X side. I think for all parties it had a nice effect on our business flow. Definitely had a good result for our brokers because as I say, they were able to deliver.
More capacity, more quickly to their retail broker or their client. So yeah, very positive. But and I think to your point that's one of the models where we think that does work quite well and we think there might be some other potential ways of using that.
Mechanism as you know, there are a huge variety of smart follow, fast follow etcetera models out there. Again, I'm hoping that over the next couple of years each underwriter can distil their thoughts on what works for them. We're quite clear on what works for us, but everyone needs to pick their own versions of the model and then apply them consistently.
00:16:16 Mark Geoghegan
In terms of those opportunities, are there any classes or territories from which businesses emanating that you're particularly happy with at the moment? Or you don't want to say all your trade secrets?
00:16:24 John Fowle
No, no, I don't think I'd try and be. I'm not close enough to the front line to say I particularly think this territory is doing this and and our territory is doing that. Of course classically, like a lot of Lloyd's businesses, you can pretty simply say, well, you've got the North American business versus the international business. And I think as.
So at the beginning, you know we're a good stage in the market where pretty much everything we do we think is rate adequate, which is a lovely situation to be in. It's just about the supply and demand now and what happens next, but.
Seeing the continued momentum on the surplus lines business in the US is a very positive factor because we need the rate to stay above inflation. We're wrestling with all sorts of issues around secondary perils on property claims, inflation on casualty and that feels like a.
Not a stable, healthy market with a continued demand with the shift from the admitted to the surplus lines market, with Lloyd's position being so good in that. So I said that was particularly healthy and then I'd say everything else is usually mixed bag which is say I wouldn't want to sort of say this territory versus that.
00:17:29 Mark Geoghegan
And in terms of that flow? Do you think that's peaking? Flow from US admitted lines into E&S and by association also overflowing into the London market. Has that flow, Peaked?
00:17:42 John Fowle
I think Overall, yes, we think it's probably about peak and that's really about local markets, increasing appetite, stepping back in, which is just that classic lagged effect of perform.
Months the London markets had a few good years. Everyone looks at the business that they've lost. The London market thinks, well, hang on a second, maybe we shouldn't be losing so much of that. So they then maybe loosen up their own appetite and do a bit more of it. And then just generally the global supply demand thing. And I don't mean major inflows of capital, it's just a bit.
Closer to the frontline of just underwriters looking to do more, certain businesses looking at the way their top line has gone, seeing that the rates are flattening and seeking to prop their top line up by volume, whereas pretty much everyone's been able to get their top line where they want it to be through.
But it's at the margin at the moment and I think it's the really interesting bit is the what happens next, do we go into a proper ill disciplined cycle? Are we going into a super cycle, all these factors that I think.
You can get very macro about. I think the bit that continues to work and the bit that I think we've all seen you and I have seen over the decades is that's all really important.
Enough, but it's all about maintaining discipline, and if you maintain discipline then the macro comes and goes, but the bottom line stays where it needs to.
00:19:05 Mark Geoghegan
Be you could underwrite what's in front of you and make sure you decline the things you should still be declining and making sure.
00:19:11 John Fowle
That. Yeah. Control what you can control, right? But don't think you can control the macro all the time.
00:19:16 Mark Geoghegan
We'll see what happens after Hurricane Milton again, if that just is it a loss, that's hopefully not too big, but also perhaps not too small. Is there such a thing as a Goldilocks sized loss? It's, I mean, and all losses are terrible anyway. So basically at that sort of level, maybe would be the right sort of size 1, the one that would keep the discipline at the same time and keep the flow.
Do we keep the keep, but still we keep your profitability?
00:19:35 John Fowle
Well, let's see what happens next, right? Yeah. You know, we all know that cat is the single biggest driver of our markets. Obviously, it creates the biggest impacts. And you've had Helene and now Milton. We'll see how the numbers play out for Milton then. Then we've still got several weeks to go and season. So very interesting to see how that element affects things.
00:19:56 Mark Geoghegan
Now zooming out to bigger picture in terms of the flow of business and the way that businesses distribute it, it's been interesting. We've had this partly partly secular change of business flow into the excess and surplus science market into specialty markets, away from standard vanilla markets generally, particularly in the US, but also we've seen the way that that business is underwritten, it's been transformed in parallel with that change. We've had growth in hybrid carriers and growth in those hybrid carriers that are supporting MGA's and that peak in MGA's, there was a pause certainly when the market turned, a lot of people would have said.
Yeah, we won't be seeing quite so many mgas alone will be non renewing their paper and we'll bring all that back in house. And that certainly happened for a while, but there was almost like that was just a pause and suddenly the growth exploded onwards and we were a position where we've got many, many more MGA's than we had before supported by hybrid carriers, but also supported by the market in.
General, how far do you think this could go and is this a permanent change in the way that insurance is being underwritten and distributed?
00:20:57 John Fowle
I think there is an element of permanence about it, but I think it's because there's a greater recognition that there are different ways to play in the value chain. And I think when we come to underwriting, so underwriting at an MGA or underwriting an MG U and that's sort of interesting, but a terminology between the two.
And what are they doing and what value are they potentially bringing to their customers to say exactly the same way as a Lloyd's managing agent would be seeking to do versus?
Is who is their capital and what value are they bringing to them? I think there will always be permanently now.
Good mgas and bad mgas bad mgas will not do a good job by their capital and will not ultimately do a good job by their customer. But then that's always been true of carriers as well, right carriers that make a whole series of mistakes start pulling out of businesses leaving their clients that effectively Orphaned.
That's not good either. It's all about quality businesses doing a quality job and maintaining a relationship. This whole point about one way or the other, somewhere in the value chain, you're bringing capital to risk. It's just working out what your role in that is and making sure you do it really well.
I just don't think there is a universal answer. That's definitely right. So if you.
Are just thinking about it from the perspective of underwriting. If you are a good underwriter working at a big big balance sheet business and you're adding value, great. If you're a really good MGA.
Great, but just be good at it please, because the alternative just makes this market more volatile than it needs to do in terms of its results will always be volatile in terms of the loss experience and drags us down into these long periods of underperformance where it's pretty miserable for Everyone.
00:22:56 Mark Geoghegan
One of my pet theories bubbling away in my head is that as you digitise the market, it makes it easier for these things to happen. Back in the old days there 30 years ago, every time you add another link in the chain, you add 10 points to the cost and the so things get more and more complicated cause lots more bits of paper are going around the marketplace. Whereas now if you make things more seamless, more digital.
Then I suppose it frees people up to do the thing they're good at. I am a good underwriter and I can leave all the other bits to somebody else. I'll leave capital provision someone else.
Because it's not my Forte and you know, and they can maintain the rating with S&P and and M best, et cetera. All these other things that they have to do and keep their investors happy was I just have to keep them happy and keep my brokers happy, keep my clients happy and then you know I'm happy because I'm adding value at the bit that I'm really good at and I can be valued on that as well. Of course, I can have equity in that as well.
00:23:45 John Fowle
Yeah, I think just working out from the retail end of distribution, as you say, all the way to capital or anything you can do, that means that data flow on that is consistent and quicker. And as you say, people can then be looking at their part of that and doing it efficiently. That's gotta be good news, right. And and it's that. But we've all been wrestling with the if you can cut out the frictional expense in that obviously that's good. That's good for everyone because Underwriters just want to make a sensible combined ratio really.
And it doesn't actually matter if you take two points off your combined ratio through the loss cost or the expense. You just gotta get to that sustainable combined ratio. So all power to that and your patrons done some very good work on that over time and has some good products that try and do that as best we can. So through our traditional.
Distribution route, but increasingly digitising it and making it easier for the distributor, making it easier for us and trapping that data in a way that allows us to report on it as well much.
00:24:44 Mark Geoghegan
In a way, you're part of the Lloyds market and had a slightly lighter structure than in the post reconstruction renewal had a more traditional capsule base here. Atrium Lloyds obviously has always pioneered that separation of powers between the capital provision and the underwriting. And of course you want to align the interest between the two of those. But this has been happening for 300 years.
We've have you seen a bifurcation, a A balance sheet company split itself up into its underwriting and its balance sheet components, do you there's any lessons to be learned from that or do you think other companies might do it in nature? It's almost like you've already there.
In many ways, I think that hybrid model, as you say, I mean that is where atrium's always been and that's because it has managed to.
To be very consistent about its underwriting performance, that's then meant that it's had a consistent capsule provision through a very traditional Lloyd's model. As you say, it's actually that's survived R&R and has carried on ever since. And I think that works well. I think that allows the equity capital in the world, the equity investors and the underwriting.
Capital providers to be, as you say, very aligned. But just looking at the business from a different angle and that works because whatever line of business you're in, you need to be doing it in a way where investors want to put their money behind you, whether their equity investors or whether their caps investors. So you're right.
That's the hybrid model works to your point where the more people will bifurcate truly bifurcate. I think that's a fascinating question and it's been very interesting to watch that bifurcation play out for a Lloyds business, as you said, because it's something inherent in the Lloyds model that allows a hybrid version. Not quite sure you.
To go all the way through that, you can just do the sum of the parts work and say, well, this part of the business is about underwriting and this bit is about delivering return on capital and they're joined like this and smart investors can look at that and say ohh I get it and I get the balance between one and the other. So lots of lessons to be learned.
Very interesting case studies and then how do those case studies play against what you're doing and how you're genuinely delivering to those investors?
00:26:56 Mark Geoghegan
Be there, as I say, pure underwriting capital investors or equity investors, it's a pretty good time to talk about. Yes, I remember the last time we would do a sort of back of a cigarette packet valuation of atrium was because of course atrium has changed hands a few times that sort of thing as a journalist you'd say well, what would it go for, what would the price be? What would be a good price and what?
The bad prices of things that you do as a financial journalist, you look.
First of all, what's happening? And then there's always the other question in any financial journalist, how much and what would it go for? Is it good multiple? And of course with you have that element of the fee earning side of your business and then the return earning side of the business that it was not say totally unique but odd ones where we would have to have two columns and add them up. It's not very complicated. Does that change in the marketplace? Point to a place where you might have a permanent owner.
Funny it is, of course, the great paradox of something that this is probably one of the most stable businesses, but also happens to have changed hands three times.
00:27:50 John Fowle
Thank you. That's a great observation because that's the point, isn't it? The consistency in atrium is atrium. The fact that the ownership has changed and actually morphed over the last decade more than really changed I think is interesting. The most consistent bit is that underwriting capital that has been super, super consistent for atrium and obviously I've thought about this.
A lot over the last couple of decades, working in different environments for different types.
Owners, you know, being private equity owned, yeah, there's some real positives to that, right, because what you've got there is you've got a shareholder who is obviously financially extremely savvy, extremely focused on strategy and performance. So that's not a bad influence on a business where your people
Are generally looking at their customers and saying what do I need to do today to do a good job as an underwriter or a claims adjuster or whatever, whatever. And then when you bring that all together, you've got this discipline of a shareholder saying and how does this all add up and where's it going?
00:28:53 Mark Geoghegan
And can you do it faster?
00:28:54 John Fowle
Usually. Well, yeah. I mean, I don't think that's a PE thing, particularly actually, that should always be.
00:28:58 Mark Geoghegan
The question thing, yeah, it's like, can you get on with it, please?
00:29:01 John Fowle
Yeah. Why wouldn't you? Are you doing as much as of what you should be doing as you can?
And you know it hasn't done him any harm and it's allowed him to manage soft cycles and hard cycles because the same skill that says are you doing as much as you could be doing now when the sun shining is the same question set that would make you think, are you being prudent enough in the hard times? So I I think the model works really well actually.
And it's worked extremely well here, and I've certainly enjoyed my first year of being in an environment like that.
00:29:34 Mark Geoghegan
Got a couple of more specific questions. One thing we'd all know him for is a proper position in the specialist end of the aviation market. You might have semi packing because of all sorts of negotiations and pork cases going on. But I wonder what you can say in terms of how the market we've had the Russian invasion of Ukraine. I don't know if I'm allowed to say the word loss a new bit of loss experience for us all.
Learn from did the market respond the way it should have done? Do you think it's difficult? And obviously I don't want to put you on the spot if it's too hard.
00:30:00 John Fowle
So I'll try and answer it in an appropriate way, but thank you for the sensitivity on it. Well, I think the situation here because you've got an unprecedented complexity and scale of loss, what that has done is made it difficult for the market to respond in the way that I think we've previously seen the market respond so well.
When all risk coverage and war risk coverage are potentially both in play, it's just the scale of it is complex and different. Participants in that market have.
Their particular interests of a scale that they themselves are having to think quite individually about how they deal with it. So that's made it tough where we're at now and certainly from an atrium point of view. I think Agent did a good job of absorbing what was going on.
Getting on the front foot, both in terms of the claims side and also the coverage side.
Going forward, but we do have this effect that actually we need to see how the litigation plays out because that's where we're going to get the key lessons, because the legal costs alone on this are immense. That would obviously suggest that the coverage.
Wasn't ready to react in a perfectly automatic way to it a lot, so we need to look at that and say so going forward.
How do we revisit the wordings in the aviation world to allow for this type of scenario, but right now we're in the learning part of that so well, how is coverage ultimately going to be deemed to have responded, trapped that and move forward?
00:31:43 Mark Geoghegan
I suppose it's the history of insurance is having to respond to an unanticipated series of events that have led to a situation that wasn't necessarily contemplated in the wording.
00:31:51 John Fowle
I suppose those are always the big, big learnings, aren't they? You know, you kind of, you try and think of everything and you can get into the whole, you know, known unknowns and then your unknown unknowns or whatever they are, but you try and set that up. But every now and then in most classes of business, you have something that.
Changes all of those preconceptions and the way the coverage was written, and you have to say so what's the lesson? And at that point, especially in a technical skilled class like aviation, aviation war, you then have to do the download of what is the lesson learned and what is the coverage we need to give our sophisticated insurance.
So that we're actually giving them what they need and then you have to workout how do we price for that going forward because.
Probably are pricing assumptions will have been proven probably equally wrong.
00:32:36 Mark Geoghegan
Yes, I suppose if you don't necessarily know how something's going to respond in a scenario that you didn't necessarily contemplate, then yeah, the idea that you could price for it is also fanciful.
00:32:45 John Fowle
I think that's right. So I think unfortunately, yes, it feels very painful and difficult and time consuming at the moment. I'm just saying I think as we work through this, we will get to a good place. It's just right now we've still got quite a lot.
00:32:59 Mark Geoghegan
To get through, there's certainly demand for this product. Yes, we're not quite sure exactly what it's going to be going forward, but.
At least you know it has a future. If you want to.
That's it.
00:33:08 John Fowle
Absolute. And you know aviation's core core class to us. So you know we will want to solve this problem and carry on as we have done frankly ever since the claims first arose.
00:33:18 Mark Geoghegan
You had a decision to exit property treaty reinsurance, was that an atrium specific thing or a class specific thing or is it obviously we read a lot of particularly about London perhaps not being the Mecca for reinsurance it was et cetera, all sorts of theories.
But anyway, what was behind it from your perspective?
00:33:34 John Fowle
Yeah, it's an interesting comparison, cause in aviation that is something that.
Lives and breathes and packs a punch in that world where we matter because we are lead underwriters. We do a good job underwriting and therefore the aviation market want to deal with us. I think where we've got ourselves in property reinsurance is we've made it incredibly difficult for the team to have any real impact property reinsurance.
Is dominated by cat, obviously, but property reinsurance is a market where you've really got to have the capacity and. I suppose that's.
The willingness to deploy the capacity as well, in quite big numbers, in order to be a relevant player and I use that terrible analogy that I I think atrium had ended up sort of sending its team into a knife fight, armed only with a toothpick.
And that's tough, and despite the acumen and skill and diligence of the team, I think the job is just very tough to do. So redeploying those skilled people and indeed our appetite into areas of the business where we have a more meaningful presence for the brokers.
That just seemed like an appropriate thing for us.
00:34:47 Mark Geoghegan
That makes it some sense, unless you're suddenly going to go and raise a tonne of capital or Marshall some huge facility or something, it's not going to happen.
00:34:55 John Fowle
Yeah, tough. When the market goes through that cycle where you get pressure on signings and yeah, the smaller line people suffer because the bigger line people start to bang the table and demand that their signings are protected. So the point about Lloyds, Lloyds works perfectly well for insurance. I think you know for the big reinsurance lines.
Probably just hasn't been the most efficient place to write reinsurance. If you have a choice. So if you're the syndicate entity in a large corporate.
Balance sheet business, the likelihood is that that business would say well, actually reinsurance probably sits better in our European Head office or in Bermuda. So it was losing out for that reason. I mean fundamentally it works OK for reinsurance and I think particularly with Lloyd's, I think looking at it themselves and thinking about what areas of reason.
Lloyds Underwriters might be supported in focusing. I think there might be a little bit of a renaissance. I'm not sure Lloyds will ever be the home of the $200 million cat line being picked up like you know about four or five different underwriters. That'll probably continue to remain in the larger company market centres.
00:36:06 Mark Geoghegan
I've always known atriums being pretty good on tech and you mentioned quite a lot of this of fruits of that those sort of labours that you've had over generations. We could be talking in 2024 without talking a bit about a.
I what sort of applications have you been able to find that have been the best fit for atrium?
00:36:22 John Fowle
Atrium's been sort of diligently trying to work out how to deploy AI for a while now, 5 or 6 years. And actually we've partnered up with one of the Lloyds Lab participants many years ago to explore this and and where we found it most useful is.
Actually, on the claims site and looking at how natural language understanding and programming can look at where our policies are relatively standard. So this is more volume business, particularly our delegated authority.
Business looking at where that policy language and and the the exclusionary endorsements or the inclusion re endorsements, how that works and then being able to compare that with unstructured claims documents when a claim comes in and do an early match to say well, this is probably the nature of the loss and this is the likelihood that it's covered. So it just speeds up the claims handling process that's been super, super efficient and of course it works at its best where the distribution side, the underwriting side of that is also digitised because obviously you've got things talking to each other in a far more efficient manner. That's been a good area and we want to build out on that because again it's, you know it's an efficiency saving, it's a time saving. It cuts down error rates etcetera, etcetera.
I think that's the right way to look at. AI is not to think it's the answer to everything but try and spot these little opportunities where it just adds a bit of value.
00:37:45 Mark Geoghegan
Someone said, well, why not get it to read 105 inspection reports, you know, or engineering reports and find interesting things in them. Maybe it'll read #72 the the even perhaps the most diligent underwriter might never get to the like the the top ten locations.
00:38:02 John Fowle
Yeah, that's the point, isn't it? You know, you can use it to consume a lot of information quickly. That's the point. So I think we'll keep looking at that. We're definitely like a lot of.
Other people trying to work out how to use it well in underwriting triage, which is maybe a similar point to the engineering point that says look, we get this information through a submission while some of this stuff we just need to get in a particular shape. So the underwriter can spend 2 minutes looking at that element rather than 20 minutes looking at that element. So your powerful tool, but I don't think in specialty AI is a panacea, right? It's just these marginal gains.
00:38:34 Mark Geoghegan
It's like having a really handy assistant.
And so I've read all this stuff. Look at these things. There's it's quite interesting. You should have a look at that. And. And triaging is interesting again, just again about. So it's about efficiency. If it knew your appetite, it could perhaps rank what it thinks of the top 20 submissions you've got this morning as an underwriter and said, well, I think you look at these three first because they're bang on. We know if you get the quote out.
Quickly, you're probably gonna get a firm order.
And we know that's bang in your appetite in your sweet spot, so you should do these ones quickly and then the others are getting more and more marginal as they go down the list. So, you know, spend less time on those.
00:39:08 John Fowle
And heat these ones right now. Yeah. And the automation and AI both play into this, but where you've got effectively manual administrative tasks that people have to actually look at and then you can.
Automate and say well, do they actually need to be looking at them?
And then you can use AI to then enhance that there's a good road to travel down on this where we just get quicker and more efficient and we'll grab every opportunity we can see sort of.
00:39:33 Mark Geoghegan
It would be nicer to grow the market without necessarily having to grow the headcount and grow your profits. Grow your margins without having to correspondingly grow, head down and same proportion.
00:39:43 John Fowle
Yeah, the way the way I think that you want your human intelligence directed at the bits where it adds the most value, right? So if you can aid and assist it by having your artificial intelligence doing the stuff where you don't actually need a human brain to do it, that's great. Cause it's not just good for the business. It's good for the.
Individual the individual gets to do the interesting stuff more because the AI assistant, as you put it earlier is doing the boring stuff bluntly. That's great, right? But it's easy said and harder to actually make it happen all over the place. You got a picture spot, do that fix. See that it works. And then. Or where can we go next?
00:40:21 Mark Geoghegan
With this yes cause and every time we automate something you if you do it wrong, if somebody becomes quite clear that it's wrong and you get sort of sorcerer's apprentice type situation where the things have gone off and gone a bit wild and before you know it might have come off the.
00:40:35 John Fowle
It's like innovation, isn't it? Do that in a controlled environment. Build your pilot, test it, check it. But yeah, you don't want to be deploying things into the real world that affects your customers before you're sure that's gonna be a positive impact, not a negative impact. Think the regulators might get a bit annoyed with us if.
00:40:50 Mark Geoghegan
We did that wrong in terms of, you know, quasi regulator here in Lloyds. We've got the innovation class which is not new.
But now expanded very significantly expanded and the new transition class that amounts to now 10% of stamp doesn't it does that an allocation you think you might be actually using the full amount of?
00:41:06 John Fowle
I mean, I love the IC X TCX framework, I really do. I think it's sent a very strong message. I think what we found at Atrium is that there's an awful lot of innovation that goes on in pre-existing classifications and bluntly what we do here needs to fit the quality standards that we demand of the business. So we don't.
When we need the latitude, I mean I like the latitude that IC XT6 give you, but we don't necessarily need that in order to do what we want to do very often.
So I don't think we'll be butting up against the overall 10% limit, but what I do like, again looking forward and mentioned when I say I want us to get more on the front foot and more out there and more industrialised about innovation knowing that as we do that, if we find things that don't necessarily fit.
Within our current boxes saying, well, that there we are now we can use IC X or we can use TCX in an efficient manner.
00:42:03 Mark Geoghegan
A situation where there's something that's a bit of a hybrid between two classes, and neither of those class underwriters really want it to be on their watch.
Or sort of affecting their potential bonus pool, for example. Then we'll we'll put it over there in CX and then it won't affect anybody.
00:42:18 John Fowle
Well and and so we we've organised the business so we.
Do you have an air of our business that is responsible for where we follow other people? It leads the way on innovation. It's just actually technically from a risk classification code to your point, does that go into CX or does that go back into one of our classic risk classification codes that we already have my overrunning points on? That is the flexibility and the.
Potential. All to use it are fantastic. I just don't think I'm gonna beat myself up on did we use it?
00:42:47 Mark Geoghegan
If you if you and I suppose if your process is already include a certain element with a more traditional cost that you allow innovation within that traditional class, because that's the way you've already budgeted for it, where you won't need necessarily a new class of classification.
00:43:00 John Fowle
That's right, exactly.
00:43:02 Mark Geoghegan
Another thing from Lloyds, we've had news of potential new conduct.
Framework out for consultation.
What would you like to see in that from a Atrium perspective?
00:43:14 John Fowle
Well, we hugely welcome the consultation. I think everyone in this market wants there to be a robust framework to govern misconduct and will be contributing into that consultation in a pretty full blooded way because we feel we have some.
Highly informed perspective on it, the two key bits I think if I was boiling down my personal message on it from an ancient perspective into the consultation.
Is let's really make sure we do learn all the lessons of how conducts been handled in the market to date, the whistleblowers and the witnesses in any of these conduct situations really need to be kept at the centre of the process in a way that protects them. Because if we want to. Market environment where.
People feel that they can whistle blow and that not be to their detriment. That must be key, because that's the way that you're going to uncover poor conduct and then be able to deal with it.
00:44:19 Mark Geoghegan
With that, there's a bit of a clash there. At the same time as wanting to protect some of those witnesses, but at the same time, that can sometimes get in the way of the transparency that's required for everyone to be able to learn the lesson. If we don't know what the lesson is, because we could.
Publicise it. Have those lawyers disciplinary hearings that.
Were quite open. There was sort of like an open court style document and you could read it and it was all there and we don't get that kind.
Of disclosure anymore.
00:44:45 John Fowle
Yeah, I think as you're going through the process, the whistleblower has to be protected. How you ultimately publish the findings so that people can have access to that and learn the lessons is equally important that you kind of have a framework.
That supports that I'm not.
00:45:00 Mark Geoghegan
Yeah, cause I mean it's important if you're gonna make an example of some poor conduct or it doesn't have to be necessarily being made an example of just being dealt with in the right.
Way but part of the way of dealing with it, of course, is to publicise that so that we can all see that that is not acceptable conduct and that can work extremely well across the market. You can see, ah, I know that this is absolutely not acceptable conduct and I can follow that.
00:45:25 John Fowle
Example, yeah, I think I'll just completely agree with you on that mark and.
And probably not dive deep.
00:45:31 Mark Geoghegan
But there's obviously any witnesses and parties to that situation need to be protected at the same time you've got that situation also, but you do need to know what the misconduct was in order to be able to say, right? We know that can't ever happen around here and it's very clear that that is not acceptable, particularly things that were tolerated before that are not accept.
00:45:51 John Fowle
Well, now, yeah, spot on. You just got to find a way to gather that evidence and bluntly allow whistleblowers to whistle blow. I mean, that's the whole point. You know, any of us who have looked at how you create good whistle blowing environments. It is that point that you make it something that people feel they can do without doing it.
That's the key point, because to your point, actually we need to surface by conduct. Then we need to deal with bad conduct and then we need to be able to explain to other people what bad conduct is and isn't.
That there's consultation needs to lead us down that route.
00:46:25 Mark Geoghegan
That's really good and I think yes, it's one of the things that I think it's really hard to do in practise because you, yes, you bust up against these different elements. So yeah, I wouldn't envy anyone trying to draw up a new conduct framework, but good say that welcome words, John. We've, we've had a long conversation. You've just spoken about.
Almost everything. I think that's on my list of different things we could be talking about. Is there anything that you want to add?
00:46:47 John Fowle
No, I think you've hit on some really interesting points. I am really fascinated to see how a few things evolve over the next few years. I do think specialty insurance is.
Probably in a particularly interesting period where having had few years of rate increase and probably being at a nice level of sustainability, tackling some of these bigger issues around what the specialty insurance look like in the future, how do we embrace technology at an appropriate level while still maintaining?
Human touch that's going to be really interesting. Now, I think it's a very exciting environment for the Lloyds market as a whole and for quintessentially specialty underwriters like atrium.
But now I think we've hit on some.
Really good topics.
00:47:32 Mark Geoghegan
Good. Well, it's a good market and long may continue to be.
00:47:35 John Fowle
Fingers crossed.
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