What are the top trends in the financial lines space?

Paul Lucas  00:00:06 

Hello everyone and welcome to Insurance Business TV, as we dive into the financial lines market 2024 has been a year full of opportunity but also heightened risks as firms in the financial space look to leverage AI, ramp up their cybersecurity use data to drive the growth and embrace both ESG and DE&I. So let’s dive into the trends that are shaping the space and who better to guide us than John Van Decker, Head of Global Financial lines at Axis. John, welcome to IB TV. 

John Van Decker  00:00:38 

Paul, it’s great to be with you. 

Paul Lucas  00:00:41 

So John, let’s talk about some of the macro trends that are impacting the financial lines market in 2024. Are there any changes that you’re seeing from the prior year? 

John Van Decker  00:00:50 

First I may explain access financial lines for you, the Axis financial lines as a global business, it’s been a strong platform for us a platform that we have invested in for a long period of time. It’s diversified by product and geography. We’ve provide a wide range of products including D&O, EPO, fiduciary, crime and many E&O lines of business. We also serve many industry groups just to name a few construction, financial institution manufacturing. So we have a pretty good view of the overall financial lines marketplace and some of the macro trends that we’re seeing two key areas that we’re focused on. One is the economic environment. These product lines are sensitive to economic stress, and economic turmoil. So I think if you look back about 18 months ago, you would expect a little bit more stress in the marketplace recession that was predicted by many analysts across the community. So far, so good, but we are watching the underlying cracks in the potential issues in the economy. We see bankruptcies up, for example, in the US, for the first quarter, we’re seeing higher interest rates, higher inflation, what does that mean to our customers? What does that mean to their risk profiles? What does that mean to the last trends going forward? So that’s an area that we keep a watchful eye on, as we move forward. The second areas competition, you know, there were significant rate increases that went through the overall financial lines business from 2019, through to 2022. Obviously, that attracted a lot of capital, we have a new lot of new players in the market. And we are competing with, with long established competitors as well. So that’s another area that we focus on.  

Paul Lucas  00:02:28 

So higher rates, higher inflation, more competitors in the market. How is the insurance market responding to all of these changes? 

John Van Decker  00:02:37 

Well, I think a couple of things right. So we are seeing competition on price, we are starting to see a little bit softer terms and conditions. But we haven’t seen a significant impact and capacity, right? We’re seeing limits deployed, manage. That’s important. For us. It’s an area that we focus on. We are also seeing a lot of lines of business that have rate adequacy, right? So underwriters have better tools, better data analytics to analyze specific customers and specific product lines. And we see a number of opportunities across the financial lines business that we serve, for example, private company, D&O and related lines, small D&O, and E&O out of London, we grew those businesses by double digits in the first quarter this year, we think will produce good business for us in the future. Construction professional, right, we’re seeing significant amounts of capital and resources going into building out infrastructure in the US. It’s an area that we’re going to continue to add resources into as we see really good opportunities in the construction professional space. So a number of areas that are positive and areas that we’re going to focus on. One area that you won’t be surprised that I say is challenging is the commercial public D&O segment that’s seen significant rate decreases over the last couple of years. It’s an important part of our business. But we’re being very disciplined in that business. And we will work with our long standing clients and selectively look at new business in that segment.  

Paul Lucas  00:03:59 

Can you tell them a little bit about some of the business changes you’ve made, but with so much going on in the market? I imagine you’ve had to make quite a lot of evolution. So just go into a little bit more depth for us about the the changes that you’ve made at Axis? 

John Van Decker  00:04:11 

Yeah, so we’ve made a number of changes and it’s an exciting time to be at assets. We raised our ambition as a company to be a leading specialty underwriter and provide specialty products. So what does that mean for us, we want to provide a better customer experience and better broker experience drive specialized products into that space. What we’ve done, for example, in the US as we repositioned our business by distribution. Today, we have three businesses in the US one that is solely focused on the wholesale channel for financial lines, both commercial and FYI, that business provides expertise for solving complex risk. It provides fast solutions. It provides innovation, we’ve seen a lot of growth in that channel, and a fat it’s a fast paced channel. On the retail side, we split our business into two separate areas one complex financial lines for retailers, that’s our fortune 500 public type of business, as well as a large, FI business in that space. You know, our underwriters are experts in what they do they work closely with our retail brokers work closely with our customers to provide customized solutions for complex risks. And then we also have developed a lower middle market business that’s providing business for private companies and middle market businesses across FI and commercial again, so we’re providing a broad base of products across those industry segments. And that’s more of a fast flow business, more of a middle market business. So we’re technology is important, we’re processing is important. We’re underwriting at that pace is important. And we’re seeing good growth there. And we think that will be a steady growth business for us. And we see tremendous opportunities in that business. And we continue to invest in the digital side as that as that kind of stuff fruition. 

Paul Lucas  00:05:57 

You spoke there about both your your retail broker partners, your wholesale broker partners as well. Any tips for those who are watching? How should they be navigating the financial line space this year? 

John Van Decker  00:06:07 

I think they’re up in their game. You know, I think the broker industry across the board is up in their game. When I look at how specialized they’re becoming what they’re doing by industry groups, whether it’s by products, whether it’s by various different industry segmentation, they continue to improve on their services and capabilities. They continue to improve their analytics and their insights that they can provide to individual customers and industry segments to help them with their risk evaluation with the emerging risks. So we continue to see them put a lot of investments across the services they provide, and they’re looking for carriers such as access that can solve solutions for them with expertise with specialization with claims expertise, right? These are important areas. And we are well positioned to provide those services to our key distribution partners. 

Paul Lucas  00:06:54 

And great to hear that the brokers are upping their game and I’m sure you’ve given them motivation to do so even more. Many, many thanks for your time today, John.  

John Van Decker  00:07:02 

Paul, it’s been great to be with you. 

Paul Lucas  00:07:05 

John is clearly an expert in the financial line space and if you want more insights from those at the very top of the industry who truly know the market, well keep it right here and Insurance Business TV.