Mairi Mallon casts her eye over the Class of 2005 in the aftermath of what many in the market are calling the most difficult renewals season ever
While the rest of the world was contemplating the Christmas break, there was a small group of people who forsook the festive cheer. Instead they left behind their families and endured constant 14-hour days, with hundreds of emails to be read, contracts to be drawn up and signed, and with no-one else to even make coffee or answer the phone. Welcome to the world of the Class of 2005.
Despite still looking somewhat rough around the gills, the executives sitting in their make-shift offices, with laptops and mobile phones, are heaving a sigh of relief after having to scramble to get all their work done in the few weeks between setting up and the January renewals. And initial reports suggest that the monumental effort was worth it.
All members of the new batch are in upbeat mood as the dust starts to settle on the January renewals, each reporting that they have at least matched their forecast targets.
Flagstone Re has, in fact, exceeded targets for the January renewals.
Spokesperson for the company, Brent Slade, who handles the company's capital markets, said that the company had been very well received by both brokers and clients. "It is not just the quantity of the business we have been writing, but the quality," he said. So far Flagstone, which raised $1bn in capital, has over 20 people working in its Church Street, Hamilton offices. And they will be looking to recruit more staff as the company goes on to diversify.
Flagstone is looking to the many renewal periods coming up, starting with Japan in April, and the opportunities to diversify its portfolio.
But Slade said that the company would be more selective than some of its fellow classmates, focusing on property catastrophe reinsurance, short-tail and some very select specialty. They will not be moving into direct insurance. "We are keeping it a little simpler," he said. "We have been very well received. Flagstone may be new, but our senior people and our executives have had a long history and relationships with clients and brokers, so we have received a very, very good reception and have seen a lot of business. And we are very happy with the way we have been received and that has allowed us to be further ahead than where we had initially projected."
John Andrews, underwriting director of Amlin Bermuda, who has been effectively managing the show in the mid-Atlantic while the company looks to fill the position of CEO, said of their performance, "Since we opened for business on 1 December, we've been pleased with both the quality and amount of business we have been shown by brokers, writing $55m net of new business, excluding intra group business ceded by our Lloyd's Syndicate 2001.
"Whilst the pre-launch indications were that Amlin Bermuda would be well received by both brokers and insureds," he added, "it is nonetheless encouraging to be shown the same high quality business which we have seen at the Lloyd's Box over the years."
Amlin was set up with a capitalisation of $1bn and writes regional US and international catastrophe insurance and excess of loss.
Robert Childs, chief executive officer at Hiscox Insurance (Bermuda) Ltd, said he loves living and working in Bermuda - even though he has had little time to look up since the company started out at the beginning of December. "These are very exciting times," he said between meetings in his Church Street offices in Hamilton. "We have been working flat-out, coming in at 7am and not leaving the office until 9pm." Childs has five underwriters with him who have been granted quick work permits to allow them to get the business going. Now he is looking to expand the team to include administrative assistants, trainee Bermudians and other key staff.
"But we do not plan to expand beyond 12 people in this office," he added.
Hiscox's Bermuda operation raised $500m in capital, but Childs said they only set out to write $350m in the year, with less than half of this being reinsurance. The rest of the business was going to come from balancing items from their own internal companies in Europe. So unlike some of the other companies, the pressure for Hiscox was not great. Childs said they built a portfolio that was going to be profitable rather than one that was going to grow quickly. "It's been good," he said. "We have had a good showing from all the brokers. Because we write reinsurance in London as well, we wanted to make it clear that writing business in Bermuda was not instead of London it was in addition to."
And while he would not reveal how much business had so far been written, he said the Bermuda operation was "on target". And this is fairly impressive as they only really had a week before the renewals to write business in. "I feel pretty satisfied, really," he said.
Don Kramer from Ariel Re, which raised $1bn in capital for the venture, has not had the same structural problems as his competitors as it bought out Rosemont Re, with all its staff, computers, models and back office support. Kramer has been one of the few executives who has not had to answer his own phone. Unfortunately, at the time of going to press, Kramer was unable to comment on the progress of his new operation due to the fact that his workload was hardly giving him a minute to look up.
Harbor Point has also being going at it full tilt, and was in a better position as John Berger was simply taking over Chubb Re's books - which he knew well as he was previously chief executive of the company.
Richard Brindle has certainly been busy. Not only was he setting up Lancashire Insurance Company in Bermuda for the 1 January renewals, but he and his wife also had a baby on 3 January. Despite sleepless nights and very long days, he is very pleased with the company's performance. Already staffed up, with 12 hired in Bermuda and four in the London offices, Brindle says he is storming ahead with the company's infrastructure, but is determined he is not going to grow beyond 25 in Bermuda or lose that entrepreneurial spirit he has found over the past two months.
"Renewals have gone well," Brindle said. "One of the reasons we set this whole thing up is we anticipated a severe dislocation in certain areas of the reinsurance and direct markets and that is really where we focused our capital. There have been blips up and down, but in broad terms the market is just as dislocated as I expected it to be, with, I think, substantial deterioration still to come on Katrina and Wilma - one of the things I have picked up being in Bermuda is just how nasty Wilma is becoming. I think there will be a lot more pain and I think, without sounding too vulture-like, as a new non-legacy player unaffected by these issues, it does play into our hands." Brindle would not go into specifics, but confirmed that they had met their targets. That said, the targets were not to write all business during the renewals he added, and said it would be naive to write all the retro-aggregate at 1/1.
Attempts to contact Newcastle Re, backed by funds managed by Citadel Investment Group, failed. But despite an inability to contact the company, Chris McKeown, who also runs CIG Re (Citadel's insurance franchise), has a good reputation and the business is said to be doing very well.
Validus Reinsurance, set up by Aquiline Capital Partners and backed by Venturion Capital and Jeffrey Greenberg, is one of the hot favourites to do well in the renewals. AM Best gave the company an A- (Excellent) rating early on and Ed Noonan, formally chief executive officer of American Re, has been hard at work in the top job since it launched on 14 December.
Validus Re's underwriting strategy is to focus on low frequency, high severity property and specialty business.
While most have gone at it guns blazing, some knew they would not be able to enter the fray at 1/1. Arrow Capital Re, set up by the Goldman Sachs Group, has stalled at the starting blocks. It has failed to, so far, get off the ground, although the word is that the backers felt there was no urgency to get ready in time for 1 January. A spokesman for the company said that the company would be opening for business in the New Year and Bermudian Kymn Astwood, who is chief executive officer of Arrow Re, is tipped to run the business.
Finally, Omega's Bermuda operation is scheduled to start in the first quarter of 2006, as is Montpelier's Blue Ocean, and the much larger Ascendant about which little is known - its capital or backers are still a mystery - although it has been confirmed that its team sheet will include David Whiting, Richard Black and Rick Pagnani (Whiting and Pagnani both recently quit Quanta), and the company will be ready for business at some point in 2006.
It is difficult at this stage to see who is really doing well, as many companies are still touting for business, and only time will tell if the business will be as brisk at renewals time next year. And when another "industry defining" catastrophe strikes in the next ten years, it will be time to look back and wonder at those who made it past the post.
- Mairi Mallon is a freelance journalist.
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