What keeps the CEO of SiriusPoint up at night?
SiriusPoint, the company formed through the merger of Bermuda-based specialty reinsurer Third Point Re and multiline re/insurer Sirius Group, launched in February this year.
Sid Sankaran is steering the helm of this class of 2020 re/insurer, backed by a 75-year history and established relationships with clients and brokers around the world.
He spoke to the 1.1 Club, Intelligent Insurer’s online, on-demand platform for one-on-one interviews with industry leaders, to talk about the SiriusPoint’s vision for the future, and the concerns that keep him up at night.
“The industry is at an existential point. As my vice chairman Steven Fass says, in some of these areas the industry needs to look at itself very hard, much as it did after major events such as the terrorist attacks of 9/11 2001. Will it? I don’t know,” Sankaran said.
He added that one industry problem is that capital is too cheap, there’s a lack of discipline, and too many failures of imagination at times.
“There has to be more discipline in the marketplace for the reinsurance market to be successful.” Sid Sankaran, SiriusPoint
“A lot of this needs to be re-underwritten and the premiums have been insufficient, so I think there’s a lot to do—that’s what keeps me up at night,” he added.
2021 has proved to be another bad catastrophe year, and these losses are putting a focus on the so-called secondary perils in the market that may be under-modelled.
“There’s no doubt in my mind that there are real issues here in the business and for the industry to think very carefully about. If you think about property, there’s the fundamental question around contract wording and exclusions and the risk you are insuring, which we all learned about last year; these continue to exist with cyber. There are also issues around catastrophe modelling of secondary perils,” Sankaran said.
Turning to SiriusPoint’s own business, the executive explained that the company has had a good position in certain markets and classes of business historically, but the company’s platform is “under-leveraged and under-utilised”.
“Historically, the business has been far too concentrated in the property market and without enough diversifying and interesting classes as a business around it,” he said.
“As you know, it’s been a rough five years for the property market so clearly the priority for the company on the business we’ve been on in the past is re-underwriting, repricing, greater discipline, and more focus on risk management and risk-adjusted return.”
On the Third Point Re legacy underwriting portfolio, SiriusPoint has taken a variety of actions, including exiting large swathes of business. Sankaran expects a “pretty dramatic reshaping of that portfolio”.
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Delivering value and innovation
Sankaran and his management team dedicate time to thinking about how SiriusPoint can be at the forefront of “being somebody who delivers real value, creative and innovation to customers and clients, not just capital”.
“If we’re honest with ourselves, the insurance industry makes money when there’s supply and demand imbalances. But when the supply and demand come into balance, in the history of insurance and reinsurance, people do not make a lot of money,” he said.
“How do you keep developing competitive advantages and capabilities that are of value beyond just trading supply and demand?”
Part of the strategy is creating partnerships with businesses that are not just in the business of being a pure capital provider, he said, adding that capital is “still too abundant and still too cheap” so there has to be more discipline in the marketplace for the reinsurance market to be successful.
SiriusPoint has partnered with a number of startups, including insurtech Roamly in June, and specialty managing general agent (MGA) Banyan Risk.
The company sees huge value in MGAs and is focused on becoming the partner of choice.
“We’re excited to look for great people and teams to start more on our paper.”
“MGAs fundamentally provide access to unique specialty primary insurance business, they allow us an opportunity to grow premiums in the primary space, with the flexibility to adjust volumes based on market cycles,” said Sankaran.
However, he added, the MGA model works only if you have deep alignment of incentives.
“Why did we partner with those and what was the rationale for us to help them build great businesses? First, we have a value in the company to be entrepreneurial so we look for great leaders who we believe in, who are entrepreneurial, impactful in the market and align with our vision of where we think the industry is going,” he explained.
“We’ve been thrilled by the response in the marketplace to new entrants, who share our vision to be entrepreneurial, move quickly, and be disciplined about pricing and risk selection. We’re very grateful for how well those have gone and we’re excited to look for great people and teams to start more on our paper.”
The new is certainly a big part of the SiriusPoint strategy, and Sankaran expect to see more new businesses on the platform, as well as more new partnerships, in the coming months.
To view the full 1.1 Club interview click here
