Brokers informed Q&A: Chubb's Karen Strong and Dan Atkinson

In an era of shifting political sands, crypto currencies and uncertainties over the shape of the UK’s future relationship with Europe, bricks and mortar remains attractive to investors and it comes as no surprise that in the wake of 2017’s referendum to leave Europe, the British commercial real estate market has already recovered from its post-vote stumble.

According to estate agent Knight Frank, investment from overseas continues to flow into UK real estate developments while the ‘broader rationale’ for investment remains intact.

And at the start of this year, real estate firm Colliers International predicted that transactions in the UK’s commercial property sector will remain above £50bn in 2018, just £5bn down on 2017.

Against this background, Karen Strong, head of industry practices UK and Ireland and Dan Atkinson, UK and Ireland real estate manager, outline Chubb’s approach to the market.

What has Chubb done to review its offering against a backdrop of considerable change?

Strong: “We have been underwriting real estate business for more than 20 years, but through individual product lines. So, property through the property team, casualty through the casualty team and so on.

“Around three to four years ago, we began to grow our underwriting teams but we knew there was still more opportunity in this market than we were seeing, so 12 months ago we decided we needed to take it to the next stage and think about how you address real estate investment risks.”

“So Dan Atkinson was one of those hires. Steeped in the real estate market after senior roles at NIG and Axa, he joined in 2014 tasked with creating a more holistic offering.

Dan, how did you go about creating this new offering?

Atkinson: “My job was to pull all the pieces together. To have a new, very specific practice which crossed over all the individual product lines, including areas such as terrorism and environmental liability. The aim was to have a complete solution for key real estate investors which involved a strong service model and a solid product offering.”

What marks real estate customers out as different to other mid-market buyers of insurance?

Atkinson: “They could be large, well-known multinational investment businesses right down to smaller businesses set up specifically to focus on property investment.

“While standard commercial risks tend to be centred on operational activities – making things, printing things, selling things – real estate is primarily about the protection of physical assets, often in diverse locations and subject to a range of differing legal, environmental and social climates. These assets have to be ones that will grow in value for the client and at a relatively fast rate of growth.

“Most investment firm clients in our portfolio will be UK-based, but these businesses will often be the UK subsidiary of a US parent, and will tend to have appetites for investment that range across the UK, Europe and Asia, which creates and adds a strong multinational flavour to their insurance needs.

What challenges does this multinational angle throw up?

Atkinson: “Many of these clients are not cash-rich so rely upon mortgage lending from banks for their capital. These banks want their interests to be well protected, so in order for the transactions to take place, they will demand to see proof of insurance – and they will want to see it right now, in the correct local languages.

“Failure by the insurer to produce the necessary documentation can easily derail an entire deal. This is why insurer service levels are so critical in this market. Underwriting and pricing is fairly straightforward, it’s service where business is won and lost.

“Failure to perform on service is the number one reason why these types of accounts will move from one insurer to another. The complexity of some of our clients’ lending requirements is the reason why we insist on the team working very closely with Chubb’s legal team so that compliance checks can be conducted quickly and accurately

How important is risk management for real estate customers?

Atkinson: “Because real estate investment firms tend to be constructed in a very focused way, they will rely on their brokers much more than, say, a manufacturer with its own risk manager.

“There are a few risk managers in the real estate investment sector, but not many. So, we are happy to sit down with the client and broker and take a very close look at the programme structure and provide risk management input to complement their cover provision requirements and asset profile.

“We can add measurable value to the client’s portfolio by providing both technical and pragmatic risk management solutions rather than purely considering the asset values.

“As these risks tend to be written with small deductibles, the ability to respond to frequency claims is also central to Chubb’s philosophy; hence our claims proposition is central to our real estate offering at Chubb.  We must respond quickly and positively – something we have been doing successfully for many years.

How easy is it to tailor real estate programmes to meet client demand?

Atkinson: “Real estate investors’ property portfolios come in all shapes and sizes. Some will focus on office blocks and developments, others will be light industrial or retail. What’s important is less the type of building, more the investor’s commitment to the portfolio for the medium-to-long term.

“This provides the degree of stability and shared understanding that makes for the most productive relationships between insurer, broker and client. The greater Chubb’s knowledge of the risk, the better able it is to assist with risk management and also offer product enhancements that are aligned to the client’s needs.”

In terms of covers, how are demands changing?

Atkinson: “Property damage is unsurprisingly the key cover along with business interruption. Then, of course we have covers such as property owners’ liability and general liability. These are all very standard across the insurance market. Where we are able to further differentiate ourselves is with lines such as environmental impairment liability (EIL) terrorism and warranties and indemnities (W&I).

“EIL is now firmly part of our real estate wording and we’re seeing growing interest in this as the regulatory environment tightens. For terrorism, we write that in the UK via Pool Re or we can offer global cover.  The key is to be able to pull all the pieces together to form a single, comprehensive product offering backed by our high service levels.”

How are you communicating these changes to your brokers?

Atkinson: “Brokers are critical to Chubb so I’ve lined up a series of meetings going forward to talk to brokers about our proposition and particularly our service levels.  The opportunities for us are there and I’m pleased to say the response we’ve received from brokers has been very positive.

“Trust and transparency are right up there as is clarity – clarity in everything we do. Our brokers can expect us to adhere to a set of standards and to involve ourselves as fully as possible in each risk. For example, when we’re presented with a risk, I want us to be sitting down with that broker within 24–48 hours to have a proper discussion. As most of this business tends to be written through London-based brokers, that’s immediately achievable.”

So what about the future?

Atkinson: “We are planning further recruitment during 2018 with the objective of growing the book significantly. Overall, we’re looking to focus our efforts on writing pan-European real estate risks, because that’s where we can make a real difference with our multi-national capabilities and network of offices. For portfolios of 25, 50 or 100 properties in multiple sites and multiple countries, we want to be the go-to insurer. We have the capabilities and we have the appetite.

“While no one can predict how economic and social changes will affect the real estate sector over these next few critical years for the UK, we have done our research and are confident that the sector presents real opportunities for growth in the UKI. In a nation frequently defined by its property-owning aspirations, it’s not hard to see why.

“In a world in which volatility seems to be a factor of life in the 21st century, the popularity of bricks and mortar as a long-term investment for citizens and businesses alike is built on very firm foundations.”

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