Ambitious promises: BHSI grows in UK and Europe

“Everywhere we look, there are opportunities to expand,” said Chris Colahan (pictured), head of UK and Europe at Berkshire Hathaway Specialty Insurance (BHSI), as he discussed his recent comments that the business is in “high growth mode”.

For a company that’s been operating in the UK and Europe for only “a little over five years”, Colahan said the insurer was “very fortunate” that in his region the firm’s operating platform was built just in time for COVID-19 and the beginning of disrupted market conditions. “That has led to a lot of opportunities for us,” he said.

When the UK and Europe arm first launched, he said, they didn’t know what to expect.

Now, five years on, he said: “Whatever our expectations, we’d say we’re certainly in line and maybe a little bit ahead in terms of the size of the business, but more importantly, the relevance that we’ve been able to gain and the quality of the business we’ve built.”

‘Claims is our product’

Colahan is not complacent, telling Intelligent Insurer there’s a lot to pay attention to right now. “The crystal ball is very foggy at the moment and it’s hard to know what things will be like in coming years or even, arguably, the coming months and quarters.”

In such an unpredictable market, the insurer has made an “ambitious promise” to its brokers and customers that “claims is our product”. Colahan is “pretty pleased” with how they’ve delivered on that and been responsive to customers, not just with their underwriting needs but with their claims needs as well.

“We want to be known as a claims-paying organisation and we proudly put it out there. We invite brokers and customers to come and test us on that. We want to be innovative, stepping into market opportunities and bringing new offerings to the market.”

For example, Colahan and his team are currently meeting with brokers and customers across Europe to discuss how parametric solutions can help with their needs. He said that in the context of a very dynamic insurance world, such as what’s happening with catastrophe pricing, he has seen interest in parametric insurance go up significantly.

The company has also set a medium to long-term goal to have a five-point expense advantage on the market, “which has been achieved”, he said.

“Our combined gross operating expense plus acquisition costs are below 21 percent, despite all the costs we’ve been incurring to invest in our business and build our platform, so we’re pleased with that.

“We’ve been profitable for four of the last five years which, again, being a startup and all the investments we’re incurring, is something that we’re pretty pleased with.”

Colahan credits “the quality of the team we’ve been able to assemble” as the key to the insurer’s growth to date. While he acknowledged the “amazing brand and an unrivalled balance sheet” that appeals to talent, he said they’d worked hard to build a company culture that attracts and empowers high quality people.

“The culture is about allowing them to be highly responsive to their brokers and customers, whether it be underwriting or handling claims,” he said.

He admitted that recruitment continues to be difficult across the industry and it’s something BHSI takes “extremely seriously”. But even in this challenging talent environment, Colahan said: “In some ways my role is simple—not easy, but simple when it comes to getting the culture right. We get the culture right, hire great people, put them on this platform, and then magic happens.

“If you hire great people, they hire other great people. That’s what we’ve experienced in BHSI, and the cascading effect of that has been very powerful.”

Doing things others can’t

As part of the global BHSI group, Colahan’s business sits within the Berkshire Hathaway Group, led by chair Warren Buffett.

“We’re very fortunate to be a part of the wider Berkshire Hathaway Group, which gives us access to a brand that’s the envy of the industry, and a balance sheet that’s unrivalled in its size and scale. That gives us the ability to do things other insurers can’t.”

The BHSI core offering is property casualty (P&C) and financial lines in the large corporate segment, and it’s the core platform of the business across the world.

“We don’t buy reinsurance, which we’ve been saying for 10 years, but that has become particularly attractive to brokers and customers in the last few years with all the dislocation in primary, but increasingly in reinsurance, markets as well. That means our underwriting decisions are our own, our claims-paying decisions are our own, and we can be more creative and arguably more responsive to the underwriting needs of our customers,” Colahan said.

The business can do things with duration of coverage and the types of risks that it takes on, that insurers who rely on treaty or facultative, or both, to build their capacity can’t, he said.

When BHSI Global was set up, 10 years ago in April 2013, it had no presence in Europe. Now, with its UK and Europe operation, it has a footprint in the UK, Ireland, France, Spain, and Germany, and in the second half of 2022 it moved into Switzerland and Belgium. Globally, BHSI operates in 16 countries, including those in Europe, and as a group has written around $25 billion of premium since it launched.

In January 2023, the company unveiled the appointment of market veteran Nick Major as country manager, BHSI UK. “We’re all very excited to see what will happen with our business under his leadership and management with the already very strong team we have in place in the UK,” Colahan said.

So far the UK business has been principally operating in the large corporate segment, doing P&C and financial lines, what they call “executive and professional lines”.

“Everywhere we look there are opportunities for us to expand. There are opportunities for us to grow into new product areas and build out our product offering, and there’s a whole array of products that we don’t currently offer in the UK or across Europe.”

The company is in the process of moving into new customer segments, moving from the very large corporate segment into the lower corporate mid-market and, Colahan said, ultimately into the small and mid-sized enterprises (SMEs) sector.

“If the opportunities present themselves, we have the option to do consumer lines business as well, but will we be very thoughtful and selective about how we choose to play in that segment.”

Expansion into new geographies is under consideration, as is growth with additional distribution and new distribution.

“At the moment, we’re largely operating with a select number of brokers that we’ve been very thoughtful about choosing. Over time we will increase the number of brokers we operate with and we might be doing other things with alternative distribution, particularly working with more managing general agent partnerships in that SME or consumer line segment, where working with a partner would give us the ability to handle high volumes of business,” Colahan said.

“Our current platform, which is built for the large corporate segment, would benefit from having that partnership.”

Audacious ambitions

BHSI might not be planning more geographical expansion immediately, but it is keen to look beyond its existing core offerings.

The business is “on the lookout for local market opportunities as they present themselves”, and is keen to “step into those and be highly responsive”, Colahan explained. It has already done this in Spain and Ireland—with a foothold in Spain for just over three years, BHSI is “now one of the largest medical malpractice insurers” there, he said.

“We saw an opportunity three or four years ago, where the market was not able to meet the needs of insureds as options were very limited. We hope there’s value for us in having been able to establish a foothold in that market.

“Over the long term, we hope that being responsive to the market at a time when other insurers aren’t creates long-term brand value that will be of benefit to us, there and in other markets as well.”

Ireland is another example. Again, the business has been in the country for only three or four years but Colahan said it’s now one of the largest executive and professional lines insurers in the market.

“We’ve gone from nothing to being one of the largest and arguably the most relevant. We’ve done that by stepping into the market when many others were stepping out.”

Long-term thinking is a theme Colahan returns to when asked about the next 12 to 18 months.

“In Berkshire Hathaway, thinking in 12 to 18 month increments will be far too short-term for our company. When we started BHSI, Mr Buffett gave our group president and CEO Peter Eastwood the objective of building the world’s finest P&C and specialty lines insurer, and to spend the next 50 years doing it,” he said.

“You have to love the audacity and the ambition of that as an objective. They’d argue that if there was any organisation capable of doing it, it would be a company like Berkshire Hathaway.

“So for us, it will be much longer than 12 to 18 months before we’re able to make an assessment of how we’re going against that goal. It’ll be decades before we’ll really know whether we’ve been able to achieve that,” he concluded.