With the company’s independence guaranteed by BCI and PCP’s recent investment, the BMS fac team says it is in an “advantageous position” to exploit market consolidation.
L-R: Chris Ritchie, managing director international direct and facultative, global risks, Kristian Pinnock, divisional director, global risks, Neil Prior, director, global risks
What are BMS’ core markets for fac and where have you experienced growth recently?
Our historical base has been very much in EMEA and Australasia and in the last two or three years continued growth has come from the southern hemisphere, where domestic markets have experienced significant hardening.
More recently, we have seen considerable growth from cedants based in the US, Caribbean and Latin America via BMS Miami, particularly on the back of the recent opening of our facultative office in Atlanta and new hires in London with relevant experience in those markets.
What is the approximate split between property and casualty lines and what are the biggest components of your book?
The vast majority of our fac revenue comes from property lines, of which mining and heavy industry accounts for approximately 70 percent of revenue. The remainder is generated by the construction, marine cargo and terrorism classes.
Our focus on specialist areas within our wholesale book gives assurance that we are able to provide optimum solutions for clients. With the recent establishment of our wholesale energy team, we are replicating this capability for clients in the power and energy sector.
What solutions do you provide besides straightforward spot fac?
Our products are continually evolving and are tailor-made – be that by protecting net retention, reducing exposure to a single peril or risk type, filling a treaty gap, or responding with solutions to protect against emerging risks.
Having a growing team of brokers that blends traders with creative analysts ensures that all bases are covered, from traditional spot fac to multi-year or multi-risk facilities.
How has the fac business at BMS fared at recent renewals, and what is your outlook at upcoming renewals?
We have more than doubled our facultative revenue in the last three years, supported by the very high retention rate on renewals. We put this down primarily to our many long-term, established client partnerships.
This is despite strong headwinds such as reduced capacity, deteriorating claims records and hardening market conditions. We’d like to think that this is not just a result of our ability to create the most economical and appropriate solution for our clients, but that they have a genuine appreciation of the BMS signature personal touch.
As to the outlook, we expect rates to increase in the short to medium term while reinsurers strive for underwriting profitability. Nevertheless, the current rating environment, in addition to the relatively unknown impact of Covid-19, is becoming more challenging, particularly for international (non-US) business.
In the Lloyd’s market, in particular, there has been a notable reallocation of capacity towards the relative sanctity of US cat business (exacerbated by the rapidly hardening market), as opposed to the volatile nature of risk associated with international, heavy occupancy business.
How would you describe the challenge of building a book of new business given the ongoing coronavirus situation?
Building relationships with new clients by traditional methods is obviously more challenging in the current lockdown. We are all learning how to operate in a remote world and improvising, with new techniques to “get in the door”.
As mentioned earlier, we are fortunate to have a mature portfolio of long-term supporters and, even though they are facing their own challenges, they are loyal in their support of the independent reinsurance broker.
The broking landscape has seen a great deal of consolidation recently. How would you describe the current environment for independent fac brokers?
Opportunity knocks. It will become even more desirable for buyers to use a third party, particularly as direct business channels become fewer, leading to increased scope for conflicts of interest.
There will inevitably be repercussions within the broker fraternity as these deals play out and BMS, with our long-term independence guaranteed by British Columbia Investment Management and Preservation Capital Partners’ investment last year, is in an advantageous position to exploit the situation.
What are your thoughts on the fac reinsurance landscape to the end of this year and beyond?
We are, of course, in unprecedented times and, therefore, our powers of prophecy are somewhat diminished, but facultative reinsurance is a well-established and much-needed corner of the market which will continue regardless.
New products will be created out of the current pandemic on both a direct and facultative basis, which will, in the end, be to the benefit of client and market alike.
BMS intends to be at the forefront of that and we will be investing in the right talent to ensure our continued success.