Managing Insurance Risks: Captives & Reinsurance

[Music] I think you're right insurance is a a growing sector and we're seeing an increasing level of interest in is growth in aggm I'm delighted to be joined by such an esteemed panel today um I mean what we're actually going to cover is is two Focus areas one on on captives and one on just generally reinsurance Solutions and and uh and how they can help businesses as they grow um I mean time is fairly tight so we we'll kind of just get straight into it but please kind of introduce yourself as as we answer the questions um Carl if we can start with you and just really give us that overview sense of kind of what are captives why would companies use them you know how they work what are potential benefits okay thanks David um called the jaavan director of Client Solutions um for Aon captive and insurance management business across um the emia region basically a captive in its simplest form is an insurance or reinsurance company that is set up by a non-insurance group predominantly to ensure its own risks that of its group and its subsidiaries um why are captives being set up there are range of reasons but I think predominantly nowadays it is to counteract the effects of or the challenges of the direct insurance market so we're we're operating in a hard Market where capacity is reduced reducing um premium rates are increasing um terms and conditions are are challenging for for insurance and for those in organizations that have risks where um they're mature enough to to to retain that risk um and manage that risk a captive undertaking works really well um the the what we're seeing nowadays is also captives um are very useful where risks are non insurable or not readily insurable on the direct Market um emerging risks we're talking a lot uh during this week around AI around cyber around it risks these are all risks that organizations are exposed to effects of those risks could be catastrophic they're non insurable at the moment a captive can be um a great solution to First retain part of that that risk transfer that risk from an organization's balance sheet into a formal insurance or reinsurance structure but then also be able to access additional capacity such as reinsurance Market or other forms of capital and I one of the interesting features about the the sector is as Aon has done here sets itself up as a captive manager to manage captives can you just tell us a bit how that works and how what benefit that can provide to yeah indeed so captives are set up in jurisdictions that uh understand captives and that are able to regulate captives unlike normal insurance companies adgm being one of them and pretty much at the Forefront uh I would say nowadays when it comes to regulation of captives a captive is typically um the management of a captive is typically outsourced to uh experts um such as us Aon um rather than employing G staff to uh to uh to manage those captives and that the benefit of that brings a wealth of expertise in various areas not just pure captive management but also Enterprise risk management Actuarial and other forms of of expertise thank you um moving to the reinsurance uh space now um Matthew and Andrew have got lots of experience working in the uh reinsurance sector uh Lloyds and elsewhere but but please introduce yourselves but I mean Andrew if we could start with you thinking about the intermediation of uh reinsurance um could you us what is the role of of the broker in really helping clients find solutions to manage the risks to which they're exposed so I always like to define a broker as um ultimately uh somebody who can do a deal with people two people that don't like each other and and transactionally to of course we have a depth of knowledge and and not not only that but personal relationships in the market which give an edge I think when it comes to reinsurance ultimately we all know each other and Matt and I go back a long way we both come out of a Lloyd stable and the reinsurance market although it may seem very very large and very widespread over the world the key players in it all know each other and hopefully trust each other and so on when it comes to capes it's a very specific form of reinsurance as car just comment commented on and I think that the role of the broker there actually is a little bit more complex because it's not least you know trying to get the best deal for somebody or get the broadest cover if you like at the at the most competitive price but there's an element of you know risk advisory management and in really deciding you know what risk should be retained within a captive and what risk should be reinsured out and I think you know when you talk about the fact that these days Market pricings have been high and you know ultimately to have your own captive helps reduce your premium spend although it increases your risk retention that arguably if you're a very large operation I don't know like a ship owner like MSC shipping or somethingone like that or indeed you know ad knock here that you know if if you have good rest management within your operation and you trust the fact that you're not going to have claims unless they're from an act of God not through any lack of due diligence or any any kind of um entity where where where you don't trust your own self to to run well then capes of course are a a brilliant way to to retain risk and spend less on reinsurance yes and as well as a as a entity whether they a financial services entity or or another type of entity looks to manage the risks to which is exposed a key part part of that is looking at well what are its insurable risks and how can it help how can it use insurance and reinsurance to help manage those risks um I mean Matt turning to you looking at it from the underwriting side um I mean what what is the key role that the underwriter then plays in in this whole process thank you very much indeed my name is Matthew Warren I'm the executive chairman for Fidelis Middle East in Africa and Asia um having been an underwriter for many many years and started with probably Andrew in the late 80s I think in the Lloyds Market it's an art and a science together I think you learn for many years sitting next to senior Underwriters as you grow up you can't obiously you can study and you can read about that in books but really sitting next to the underwriter the senior underwriter in your business and learning by your class of business and really what a an underwriter does is he works very closely or she works very closely with the broker and they review the risk and he or she will set the terms and conditions of the placement accordingly obviously throughout the transaction you look at utmost good faith so all the information is shared uh in a very transparent and open environment and if you're the lead Market you may set the terms and conditions or if you're a following Market you may actually just follow the lead terms or put some differential up need be but I think for me as a reur we really understate what the industry does we are the Bedrock of the industry I think that supports Banks and F institutions and all their loans in the element of risk transfer to the insurance industry indeed and it's not just the kind of it's easy to think of insurance and reinsurance as kind of old traditional type aspect what relevance does it have but of course it plays a key role in understanding and making new um technology work and be used looking at new risks and how to actually um use those of in business but also being able to get coverage on those if things don't go quite to plan absolutely uh there's lots of I know classes of business I think we write over ac5 at Fidelis they could be Marine on construction they could be energy all lines of business in general um so you have specialists in your areas that will evaluate the risk and uh within that they'll write it accordingly yeah absolutely and I'm thinking of things new things like cyber risk and increasingly now we're seeing okay what happens on Virtual assets as well people looking for cover to complete that whole process for the new ecosystem I mean adri and Fidelis have both chosen to um set up an AGM under the kind of underwriting agent uh model uh it's a model which has in growing in uh popularity uh from I can see around the world um could you just give us your own views on uh each of you on um one why you've chosen that model and and why have you chosen to set up in aggm we we're a little bit different because um of course ABAB reinsurance company uh is in a managing General agent that writes on behalf of multiple carriers um and I'll let M comment more on on the Fidelis model the reason why we chose that model one it was very exciting to be the first here uh I don't mean to be too bad boastful about that we had a lot of help from you David in in establishing ourselves and and and it's thrilling and exciting to be in the adgm I think the MGA model is a very uh excellent way to start not least because you don't have to have vast amounts of capital to get an A rating you can uh really right on behalf of carriers who already have uh substantial wealth and and and and the reason why they quite like the MJ model whether it's an in-house MJ model or if you're writing as I said on behalf of third parties is because when you're in a region locally and our our team here we have an excellent underwriting team led by lady called T albart is in the audience here today is that she's been in this region for over a decade her her knowledge of of the business which is predominantly an energy play is is you know from 25 years of working internationally but but in terms of mgas if you trying to write the business out of London or out of America or out of say Singapore that there's nothing like having Hands-On local expertise which in theory should be ahead of the game by knowing what businesses are are going to hopefully be the most profitable so it's it's a benefit for both parties yes I think from a Fidelis perspective um Andrew summed up the MJ structure very well um we made a decision about just over a year ago to uh biate the business so the holding company the insurance group sits on the New York Stock Exchange whereas we became the Fidelis partnership and the mgu which is managing General underwriter now we followed this for years uh we are now the largest by far globally uh the mgu uh we exceed on there the various members in the US and other jurisdictions but it's a great way to focus on underwriting and analytics and risk management because we split the business so it focuses purely on underwriting dayto day and that's how really we sort manage to spe ahead the growth and the underwriting results under the chairman and Chief and executive called Richard brindle thank you very much aphrodite um moving to you um as I said at the start we've seen growing strong quite quite strong pipeline of interest in companies looking to set up Insurance operations in AGM and how can companies such as your own uh consultancy help applicants through the whole process thank you I am afroditi director of History limited we are here in the adgm we are a boutique uh consultancy specialized in uh serving financial institutions and high net worth individuals so we have experts doing that and we offer a range of um services such as Financial applications um incorporation licensing Outsourcing services for compliance risk data protection and Company secretary we conduct uh independent risk assessments and of course we deliver Advanced uh uh training programs we focus on Industries such as reinsurance insurance captives uh Asset Management brokerage firms we like uh digital assets and complex blockchain so we support clients I would say we Empower clients to um to make their own history in the UAE and in the adgm we are next to them step by step from the beginning until the end we are the people that nobody likes but everybody needs the compliance officers in the companies that you say good morning and pretend that you don't exist but we are a a safety net okay for you to make uh to conduct your business in a safe and secure way yeah and it's great to see that supporting ecosystem growing in in aggm to support the actual businesses that that are operating here I mean one one aspect is um obviously the kind of growing landscape of govern requirements risk management requirements um um compliance uh as you you you've touched on and things continue to evolve expectations um um grow so what what can companies do to equip themselves to be better prepared and to understand the regulatory environment well I need to say that whoever wants to establish present in the D in the ADM they need to know that it's a very sophisticated ecosystem that means that we we are supported by a knowledgeable regulator and I don't say it because David sits next to me we have advanced rules and legislations that adhere to International best standards I have worked in many jurisdictions so it's a very holistic approach that comes with obligations from the company side that they need to meet the expectations of the regulatory authorities it also comes with opportunities because we have areas here that new ideas innovative ideas can become reality and we have a regulator that can support it also we have an advanced ecosystem regulatory environment that the stakeholders and the investors they value a lot so they believe that enti is a secure uh environment that they can invest their money no it's like a coin so we want security we want transparency we want sustainability and at the same time we need to support the system by being compliant and when I say compliant it means in a nice productive way so companies must be prepared we have um an enhanced governance system it will be even more that comes with challenges for compliance officers so you need to choose carefully the governance compliance and risk teams that can ensure sustainability for your company and allow me to emphasize on risk officers because I am one of them and you need to choose risk officers that are capable of treating risks and creating Frameworks for emerging situations and risks artificial intelligence is not coming it's here already ESG cyber security it's a proactive approach and not a reactive approach thank you very much those that Insight can I make a small announce okay because compliance officers can also be non- compliant under certain conditions so uh I am very pleased to announce that we are incorporating the first r Insurance Association in the adgm so we will have more announcements soon we will reach out to the stakeholders of the industry but it's a very nice initiative that we um you know we hope that we will have support and interaction with all of you so exting development yeah wish you well with it just conscious of the time so just just to to kind of finish things up it would be really good if we could just get just kind of 20 seconds or so each of your views as to the the outlook for the future for for the sector I mean Carl if we can start with you just terms of what your view is for the outlook for for captives and kind of the opportunities and and how AGM can be part of that yeah um we're seeing a lot of interest um the Outlook is in my view that that captives will be at the Forefront of organizations risk management discussions um and the adgm I have to say is uh is is considering the proportionality of captives in the right way in the way you regulate them and uh and I I can only see a bright future for the captive industry um both globally and and here in the region and Andrew similary what's what's your view in terms of challenges and opportunities for the future here in well it's such an exciting place to be as you just mentioned with your new initiative there Aphrodite and I think you know Matt and I we need more of more of you and me Matt I think we need more businesses to come here we need more critical mass actually I think the market needs to to to continue to grow and I think I think that there's every opportunity to do so it's it's a wonderful place to be and expand yeah I think certainly from my side I know having been in the N Mion 19 years and regulation I think it's very friendly it's a risk-based approach uh we're delighted to be here in adgm sort of second carrier per se I guess I think there'll be more coming into the region as we know it's a perfect springboard into Africa and throughout the Asia Pacific region and final thoughts well we are here to support uh there is no reputational risk it doesn't exist but there is reputational damage and once it happens companies go down very quickly okay and I would say um we are here to not to say no as compliance officers we are here to say what you want to do and sit with you of how you can do it in the most safe way for you as individuals and Professionals for your companies and for the ecosystem that we operate within and I think you were telling me before that that the pipeline continues to grow as well of of Interest we chose adgm for specific reasons and we bring companies here exactly for these reasons it's a life choice and we put trust in that great well our time is up so that's what we have time for today so thank you very much for your insightful comments if people would like to know more then then please get in touch thank you thank you very much oh [Music]