AM Re Syndicate believes the US market is underserved by reinsurers. To solve this problem, the managing general agency is matching US primary carriers with security from Asia using quota share deals, to bring a very different offering to the market, as Intelligent Insurer reports.
Many insurers in the US are underserved by the reinsurance market, with their options for buying coverage limited to what is offered by large multinational players, and the type of capacity they can access also increasingly restricted.
But there is a new model for business that could change all that. This is the view of Shevawn Barder, chief executive officer of AM Re Syndicate, a managing general agency (MGA) she formed in 2014 with her husband Simon, its chief underwriting officer.
Their aim was to act as a conduit to efficiently deliver new sources of capital to US primary companies, matching overseas capacity keen to get a foothold in the US market with insurers there seeking alternative reinsurance support and solutions.
“In many respects, we feel that the reinsurance market is underserviced in the US and that there are many opportunities to provide a more bespoke, niche service to US insurers,” Barder says.
“At present, all that is available to US cedants is capacity from very large, global reinsurers, often on Bermuda. These companies tend to work in a certain way and often via excess of loss treaties.
“We almost exclusively structure quota share agreements with our clients. They require a lot more attention to detail and more monitoring than other forms of reinsurance deals and you need a specialised workforce with specific expertise for this to work.
“But we believe such arrangements help support the integrity of insurers and help them grow.
“We are in a niche space in the reinsurance market. We concentrate on specialty reinsurance classes, we have a high level of expertise as we have London Market training, and we structure quota share treaties that follow the fortunes of the primary companies we partner with. Finally, we bring high quality reinsurance capacity to the US market,” she adds.
“That is a unique approach. We do it right by having quality underwriters and analysts. A big part of our job is the specialised monitoring we do on each portfolio. In turn, this allows us to provide an outstanding level of service to our clients. We have developed strong relationships throughout our careers in the UK and the US, and now Asia.
“We also try to anticipate the next cycle. As such, we have created a new panel of security that focuses on Asia. It has been a huge sense of accomplishment starting again from scratch and I am totally committed to our company; I enjoy walking into the office every day.”
The company’s growth has been rapid since its 2014 launch in New York. Starting with just one client and three staff, AM Re’s premium income has grown significantly year on year and it now employs 16 people.
Although the company was originally launched to cover predominantly marine and inland marine business, it has now expanded its scope to other forms of specialty reinsurance.
“While we consider all programmes, typically we expect a minimum premium base of $10 million per contract to be economic and worthwhile for our ceding companies,” says Barder.
AM Re works directly with around 25 clients, often with several separate quota share agreements, and six providers of capacity all based in Asia except one, which is based out of Mexico.
“We like to work with a smaller number of clients and have a strong, close relationship with all of them,” she adds.
The capacity providers are all very large, well rated carriers often backed by governments in the Asia region. Barder explains that they all value access to the US market. Some write business there via other routes to market but this arrangement offers them top quality niche business they would not otherwise see and also raises their profile in the US market with brokers and insurance companies.
She admits that brokers have been, and remain, key to AM Re’s success, and that it has been something of an education process as some brokers are wary of quota share deals.
“This product can have a lot of advantages for insurers big and small,” she says. “It helps them organise their books of business and can be used in conjunction with excess of loss deals. It can control a cost structure very effectively.
“Also, the model can be applied to any class of reinsurance. While we started in marine, our original source of expertise, you can write many lines of business using this model and we are being shown opportunities all the time.
“Although we sometimes have to educate carriers, we are offering fantastic security that also represents diversification from everything else they have.”
The company remains a Lloyd’s coverholder but, she says, its success has been helped by the performance review in the Lloyd’s Market, which triggered many syndicates to have to retract capacity from some lines of business, including marine and energy. In fact, it failed to get a new syndicate off the ground at Lloyd’s last year because the market had concerns about a new company focused heavily on these lines of business, including marine.
“That has helped us, if anything,” Barder says. “As Lloyd’s has become more risk-averse and withdrawn from parts of the US market, that has left a vacuum that is being filled by new forms of security. Plus, the cost base at Lloyd’s remains simply too high. It is a great brand but they have a mountain to climb to reduce their expense ratio.”
She claims that the approach of the reinsurers AM Re is working with in Asia is in stark contrast to that of Lloyd’s and most of the listed carriers that dominate the US market.
“The significant difference is that the Asians take a very long-term attitude towards insurance and reinsurance—they are willing to support clients for the long term,” she says.
“Their expense ratio is lower, especially by dealing with us, and they see it as a long-term play. They don’t have to produce and be judged on results on a quarterly basis and they want to align their interests with their clients on a more long-term basis. That is a big advantage and very appealing to cedants.
“Equally, for reinsurers, we offer them access to a diverse pool of high-quality business they could not otherwise access. They can just fold it into their existing portfolio—we structure the package and there is very little else they need to do.”
Second time around
The launch of AM Re was not the couple’s first venture. In 2000, the Barders formed Marine Re based at Lloyd’s of London before, a year later, moving their business to Toronto, Canada, where they focused on creating a North American managing general underwriter specialising in marine reinsurance. Marine Re grew profitably year on year until it was acquired by Ironshore in 2008. The Barders continued to run and grow the business within Ironshore until 2012.
That venture came on the back of a long career in Lloyd’s for both. Shevawn started her career in 1986 at Lloyd’s of London, as a graduate trainee broker with Willis Faber in non-marine casualty insurance. She was a Lloyd’s broker in the casualty market for 10 years working for Willis Faber, Alexander Howden and Sedgwick Insurance Brokers before moving to underwriting. She was then the co-founder and chief operating officer of Marine Re.
Simon’s career in the re/insurance industry spans more than 40 years. He trained at Lloyd’s of London and was appointed managing director of Barder & Marsh Underwriting Agency and the active underwriter of Syndicates 633 & 1317. He later transitioned to reinsurance with Gen Re in Cologne, Germany and spent time at Gerling Global in London, before forming Marine Re in 2000.
Shevawn Barder is excited by the potential the company can still exploit in the US market. She says she is seeing new opportunities all the time and they are usually created by the fact that there is little true choice in the market.
“The market is dominated by the big players—they have a stranglehold and there is not enough choice in the market. Many clients would like alternatives, they don’t want to be told they have no options,” she explains.
“The structure we offer with the expertise we have in-house and the fantastic security represent an appealing prospect to our clients. We are also very sensitive to running a streamlined, cost-sensitive operation and that will also continue to set us apart.
“Looking forward, there are so many opportunities in the reinsurance market. The reinsurance industry is now global. We are working with securities outside London and that is a fantastic opportunity for our company. Like a lot of other sectors, this industry is really about people and relationships. It is about providing a quality product to our clients,” she adds.
“We have a high level of expertise and a very professional approach. We value each client and seek to work with them to solve their reinsurance-related problems. Being reliable and professional with a high level of client attention helps us compete in the marketplace.
“I am really enjoying expanding our company. It is very stimulating meeting different people from around the world in the same industry,” she concludes.
Shevawn Barder is chief executive officer of AM Re Syndicate. She can be contacted at: email@example.com
AM Re Syndicate, Reinsurance, Speciality, MGA, Shevawn Barder, North America, UK, Asia