Interview with Paul Lawrence2nd November 2013
Six months after his appointment as Chief Underwriting Officer for Hiscox London Market, Paul Lawrence talks about his career so far.
Having celebrated 21 years at Hiscox, Paul Lawrence happily admits his career choice is due to more than a touch of happenstance. “I never wanted to go to university and my parents didn’t want to support me any more, so I only had one option, which was to get a job,” says Paul. “I went to a recruitment agency and I got an interview with EW Payne and got the first job I interviewed for. I started work on the Monday, having left school on the Friday so I had a weekend off – in at the deep end."
A constant culture club
After joining Hiscox in 1992, Paul worked across a broad range of business lines including fine art, high value household, personal accident and specialty. Made Divisional Head of Property for Hiscox London Market in 2007, Paul was promoted to be the division’s Chief Underwriting Officer before being appointed as joint active underwriter of Syndicate 33 this April. “[When I joined] Hiscox looked for natural talent and ability rather than experience. The underlying culture is still the same, which is one of the endearing qualities of Hiscox.”
From an industry perspective, however, things have moved on significantly. “What has changed is the degree of regulation. When I started out there was not a lot that we didn’t do then that we do now, but it’s more formal now, it’s more formatted, it’s written down. It’s an auditable process, whereas in the past it was a face-to-face chat with a manager. But similar questions were asked, similar reports were run, although they were manual rather than automated. When I joined Hiscox’s Syndicate 33, the stamp capacity was £55m. Next year it will be £1bn. You can’t run a business of that size in the same way,” says Paul.
With that sort of capacity, plans are already well advanced to take advantage of new underwriting opportunities that have emerged. “I’m really excited that we’ve (targeted) nearly 14% growth for the London Market insurance business next year. We’ve developed the business plan from the bottom up, so every line underwriter has had an input into their own plans, so I’m hoping that that’s going to give everybody the feeling that we’re all in this together.
We’ve had a very successful run and I really want our underwriters to use that as a backstop for them to take a little more risk than they might have been used to up to now
“We’re also looking at re-entering the cargo market. Similarly, in some of the marine liability classes, we’re looking at exploiting those markets for our benefit. We’ve had a very successful run and I really want our underwriters to use that as a backstop for them to take a little more risk than they might have been used to up to now.”
Taming the challenges
Paul is careful though to guard against over-optimism: “There are big challenges out there. Many lines of business are finding excessive competition and we’ve got to be really careful that we keep our underwriting integrity strong. Saying that, there’s also lots of opportunity out there. There are many areas where we don’t have a significant market share, where rates are not at an all time high, but are at more than acceptable levels.”
One of the biggest challenges facing the traditional London market underwriter might well be the advent of the broker facilities led by Aon’s Berkshire Hathaway deal and Willis’ Global 360. Paul is cautious in his assessment of their impact: “They do take away an element of control. But used correctly the broker facilities give us access to large portfolios of business and we can take advantage of that. I think we’ve got to balance flexibility with underwriting integrity. And in certain classes of business where we would like to write more, these facilities are an ideal way of seeing more business and therefore accepting more risk. What we can’t do – and what I don’t think we have done at Hiscox – is to delegate underwriting to retail brokers.”
A testing time then. Does that mean Paul is still having as much fun as he did when starting out? “I think the fun has changed. Sitting at the box, writing individual risks, trading with brokers, was a lot of fun, but I think that now running a business of this size is a more stressful kind of fun...but it’s still fun.”
Paul Lawrence responds to questions on broker facilities
There’s been much speculation about Hiscox’s potential involvement in Willis’ new Global 360 facility. What can you tell us about this?
These binder arrangements are not new to the market. We already have similar deals in place with a number of different brokers, and have done for some time. What is new is the size of these deals and the level of press attention they receive. We are happy to write binders so long as we are able to maintain underwriting integrity and the right to veto.
The insurance market has been critical of the Aon / Berkshire Hathaway deal in the past. How is this any different to that?
The Willis facility is different to the Aon / Berkshire Hathaway deal as it would be possible for us to maintain 100% underwriting authority, looking at each piece of business on a case by case basis and having the ability to accept or reject risks as necessary. Should we sign up to Willis’ 360 Global facility, we will in no way be giving away the pen.
Can we expect you to look to strike up similar deals with other brokers?
These types of deals are not new; they are in fact a longstanding feature of the market. We have had similar arrangements with many of our other broker partners for some time now and will continue to do so where it makes sound business sense and gives us access to those lines of business in which we are looking to expand our risk footprint.
Does Hiscox’s participation in binder arrangements represent a change in strategy?
Not really. This is about doing business in a strategic and sustainable way, working with trusted broker partners on specific books of business that are attractive to us. The change if any, is around our focus on these types of deals. It’s a response to today’s changing market conditions.
Do you think these deals are a passing fad or here to stay?
We believe they are here to stay for several reasons:
These types of deals are not new; they are a longstanding feature of the market;
They enable brokers to operate more efficiently – dealing with fewer parties and with a simplified placement process, where capacity is ready to be deployed;
They give insurers access to attractive books of business with pre-agreed terms; and
They benefit the client by consolidating placement with better rated security and enabling the broker to deliver a better claims service as a result of a smaller number of carriers being involved.
Are such deals a good or a bad thing for the market?
This isn’t about good or bad; the increase in frequency and size of these deals is a reaction to the current state of the market. It responds to excess capacity, softening rates, and squeezed margins for all players.