Toby Wemyss, head of Global Fac at Willis Towers Watson
Is this is a good time to be working in the facultative market and, if so, what are the reasons behind that?
I think it’s a great time to be working in the facultative market. There are a number of reasons for that.
First, our submission volume continues to increase on an annual basis. Given the pricing pressure everyone is under and the fact that there are some big losses across a number of sectors, not to mention the hurricane activity last year, people are looking at their portfolios and looking to de-risk and protect themselves.
Second, it’s the size and sophistication of the deals we are looking at and the global nature of the solutions we are able to pull together. In the past, the focus has been more London-orientated and, while London still forms an important part of our business, the ability to strategically find solutions across the globe, working with our teams – whether in New York, Dubai, Sydney, Singapore or Johannesburg – is very exciting.
Fac has the ability to be flexible and innovative and we see more and more opportunities to provide a balance to the more traditionally structured treaties working with sophisticated markets on a global basis. I think it’s a very exciting time to be a fac broker!
There seems to have been a perception among some of the big international carriers, which reined in their facultative cessions, that the price they were paying didn’t reflect that value they were getting. Has that perception changed?
Price is always going to be an important factor but, at the same time, we would like to think that we’re having valuable conversations, articulating what the coverage is doing for that client in terms of giving them piece of mind.
Post-HIM [hurricanes Harvey, Irma and Maria] people are looking to buy more, lower down, to do the old-fashioned thing of protecting themselves.
For a while, there was a theme of using fac from an internal, cost-of-capital exercise, whereas we are now seeing people using fac purely to protect themselves and to improve their overall performance.
The total benefit of fac is also not always captured – especially in terms of helping to create scale. This can drive leverage within a specific class or region and can drive cross-selling opportunities with specific clients or brokers.
Is there still a strong market for fac as a mechanism for carving out risks – from difficult occupancies in large property portfolios, for example?
That is still an important part of our value. Even in this competitive market environment, you still have pockets of a “hard market” where, unquestionably, the risks are complicated and people value the protection.
Our ability to reduce exposure to particular risks that people aren’t comfortable with will always form part of our value but I also think fac is being used to provide our clients with the opportunity to be of more value to insureds, whether it be to provide more significant capacity on a programme or to support them across multiple product lines. We have also seen an increase in the use of fac to support the growth of local insurance markets in new geographies.
What are your feelings about fac facilities and their place in the market? Are they still in vogue?
Personally, I think the word “facilities” is over-used, but I definitely think they have a place in the market. Our business has always tended to focus on large and complex business, which has made it more complicated to use facilities, but we have seen an increasing use of facultative solutions to manage particular exposures across a broad book of business.
With improving quality of data and analytics, the possibilities for facilities become more obvious, especially with higher volumes of smaller business, as we want to be in a position to provide a solution to all of our clients’ needs. The critical element for me is making sure the solution is always evolving, efficient and, ultimately, it has to be competitive.
There’s a lot of talk at the moment about fac analytics – what are your aspirations in this regard?
We have huge aspirations for our analytical development and believe this is an important area of differentiation for us.
We have been investing in our expertise in this area for the past seven years, and while I think there are elements of the analytics theme that are now seen as “table stakes”, I see the exciting evolution of the role of the fac broker where a much broader percentage of our population is extremely comfortable with data and analytics but where, critically, we don’t lose the importance of strong interpersonal skills to bring that data and analytics to life in a way that people understand and value.
I strongly believe that anyone who ignores the importance of strong data and analytics will struggle to compete; it’s a very dynamic and exciting part of our industry.