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XL Catlin reaps benefit of scale, innovation

A multiyear spell of pricing pressure continues to drag on the insurance and reinsurance sector, but it has not stopped XL Catlin from finding “lots” of pockets of opportunity.

The Bermudian-based company is benefiting from broadening its product offerings, embracing innovation and enhancing its reputation, according to Greg Hendrick, president of global property and casualty.

Scales of economy and greater reach help. XL and Catlin became one in 2015. Today, the company has a market capitalisation of $11 billion, elevating it onto the top rung of reinsurers.

“We have seen the benefits of scale. We have been able to reduce expenses. We've been able to take over 10 per cent of our cost base out,” he said.

“We are also seeing business that we would not have seen individually by being a bigger player, by going from being a mid-tier reinsurer to a top-ten reinsurer, the largest underwriter at Lloyd's, and market-leading positions in a number of classes.

“We get to see stuff that a lot of the market does not get to see.”

At the Risk and Insurance Management Society's conference in Philadelphia last week, XL Catlin had about 80 of its people involved in more than 500 meetings with clients and prospective customers.

Mr Hendrick was part of the team, and he spoke to The Royal Gazette explaining how the company is charting its course in challenging market conditions, and in the face of innovation, transformation and disruptions.

“Risk Revolution” and “Disrupt the status quo” were themes for this year's Rims conference, which attracted 10,000 insurance leaders.

On disruption, Mr Hendrick said: “From a market perspective it is going to come a lot on the distribution side. Between ourselves as carriers and the brokers we are going to have a better way to distribute and more effectively process business, so you can help reduce the overall cost for the customer.”

Being on the leading edge of innovation is also key. XL Innovate, Accelerate and New Energy are components of XL's forward-moving strategy.

“XL Innovate is our venture capital fund in California that does investments in a little over ten Insuretech start-ups.

“We have invested in three broad groups there. One is around distribution. There has been a lot of publicity around our investment in Lemonade, which is the new personal insurer in New York State. It is not about disrupting current markets; 80 per cent of their policies were brand new buys, young millennials who had not bought insurance before.”

Other start-ups are focused on distribution and analytics.

Accelerate, an internal innovation team headed by Paul Brand, is focused on two or three big projects within XL Catlin, including the use of disruptive technology to create “efficient and effective” distribution channels for speciality products to smaller customers.

Mr Hendrick said: “Then we have a digital group that is working on a series of small projects to make sure that we are either able to pay claims, service policies or get our quotes in a more digital-friendly way.”

Regarding market conditions, he acknowledged that pricing has been under pressure for some time, although “not dramatically” for many lines.

“We are in a pricing environment that is tough, particularly in short-tail lines of business like property and energy, and some of the casualty business in North America.

“But we find lots of pockets of opportunity. Whether it is cyber, political risk, working layer casualty.”

He said there were pockets that had certain dynamics going on that made them neither a hard market nor a softer one.

“It speaks to XL Catlin's breadth of insurance and reinsurance products, to write across all those markets to be able to find the ones that are doing better, grow those and maintain the ones that are not doing as well.

“Generally speaking there is a lot of capital chasing the industry at the moment, but that does not mean that every risk is always under pressure.”

According to Mr Hendrick, XL differentiates itself from its competitors through its “broad product range, great claims paying, and innovation and creativity”.

He noted the company's ability to have a full swathe of products for a corporate customer to solve their risks, and delivering these all over the world.

“That global programme capability is a big differentiator for us.”

The company has been positively recognised for its claims paying. Last year it was given an outstanding quality marque for its claims service in the London market by Gracechurch Consultancy.

“XL started as a mutual insurance company has maintained that approach all the way through to today. The combination of Catlin, if anything, enhanced that. As long as the contract is fulfilled we'll pay our claims.

“And then it is innovation. If you have got all the products, you've got the capability to deliver globally, you've just got to stay creative and nimble. We do a better job of being innovative.”

Citing the aforementioned XL Innovate and New Energy as examples, Mr Hendrick added: “But even in our usual day-to-day activities, our folks are constantly updating our products to make them more relevant to customers and clients.”

In January, XL Catlin topped Advisen's Pacesetter index for insurance product innovation.

Regarding XL's more than 500 meetings in and around the Rims conference, Mr Hendrick said: “Rims is hugely important for us, particularly for our North American businesses selling property and casualty insurance here. It lets us connect with our customers face to face.

“We get to sit down with the customer and talk about the business and what they need from us. We get some interaction with the brokers.

“That connectivity with the client gives us a lot of feedback on how we are doing and how we can do better.

“And from the client's perspective they get to see the whole swathe of XL Catlin's products.”

Our reporter travelled to Rims courtesy of JetBlue, which provided flights between Bermuda and New York

Greg Hendrick

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Published May 02, 2017 at 9:00 am (Updated May 02, 2017 at 12:52 am)

XL Catlin reaps benefit of scale, innovation

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