John Fowle, CEO of Chaucer, tells Post all about growth, being owned by China Re and the plans for the next 12 months as well as why the business undertook its recent rebranding and the importance of diversity and inclusion.
How did the ownership change with China Re in 2018 come about?
We’d been independent until 2011. Then we became part of the Hanover Group. They were fantastic people, very smart. My conversations with them [before the sale] really centered around, how did they see Chaucer and did Chaucer actually work for them?
They had some options – to keep us as we were, which probably wasn’t sustainable, or back us by giving us more risk appetite or sell us. That conversation came quite quickly to they should sell us because the stockholders didn’t really want this sort of London Market, volatile business. We needed to be owned by someone who could back us. [I said] ‘you’ll do well out of the exit with a great return’. Us becoming part of China Re group is just a whole different level of size, scale and balance sheet etcetera.
You were around $1.2bn (£848m) of gross written premium at the time of the sale and have grown to about $1.7bn now. How?
We’ve grown and expanded as the market’s improved. A decent amount of that’s rate as price integrity came back, because it had gone somewhat missing between 2015 and 2017. Being part of China Re has allowed us to grow at this time we can grow with adequate pricing.
Has the growth been in all areas?
We split the business between what we would call insurance and reinsurance business as we put facultative reinsurance in with the insurance. We’re roughly growing with rate on the insurance business and the slightly faster growth is on the reinsurance, particularly on the shorter tail side of treaty. That’s property and also specialty, so marine, aviation, energy. A little less on the bigger parts of our casualty treaty book.
Within insurance we have grown quite a lot in property but that’s arguably flattening off now. We’ve got cyber, where we’ve been really very disciplined. Up until now, we haven’t had a big cyber bug, and this market looks quite interesting to us so we might see a little bit more growth there. US general liabilities is going extremely well at the moment with a market that’s clearly done quite a lot of re-underwriting and repricing in the last couple of years, and then we’ve got other areas where it’s a little bit duller or flat.
What then are the growth targets for the next 12 months?
It really depends on pricing, if we can sustain adequate pricing, we’d love to continue to grow. We’re now at a level where most of our lines are priced adequately so obviously that means we can take on more volume. If the market dips too quickly in terms of pricing then we’d be forced to contract because we really can’t put business on the books if it’s not going to be a sustainable price.
We’re looking to grow 10% year-on -year. We’re going a bit quicker than that now. It will be a little bit more on reinsurance than insurance.
Would you branch out into more insurance lines?
We’re pretty comfortable with the ones we’ve got and we’re not going into specific new lines at the moment. We’re building out the crisis management side of our business. We don’t want to be known as someone who jumps in and out of lines of business. We try and stick with stuff all the way through the market cycle. And just keep telling people, it’s all about price adequacy. When they don’t want to pay us a price that works we have to say ‘well, okay, it’s a shame. But we’ll be here when you when everyone else stops being silly’.
You talk of profitable growth but last year’s combined operating ratio was 103.64%?
How did you get into insurance?
Like a lot of people I fell into the market entirely. That’s almost 30 years ago. I had five jobs in 10 years with various companies that went wrong or blew up so I’ve got some good old gravestones in the very back end of my CV.
In 2002, I was at SVB, which became Novea. It was going through a little bit of a crisis at the time and what I did wasn’t going to continue, which was correct for them.
I have been here 19 years and have gone from being a line underwriter to a head of an area, to running the main syndicate, to ending up running the whole shop.
What were your ambitions when you took over?
The big drive when I was active underwriter was to take Chaucer from being a good business to being a preeminent underwriting business. We made money, we made good returns on equity, but we weren’t up there in the top quartile of pure underwriting performance. When I became the chief underwriting officer, it was spreading that across the whole business and then, frankly, becoming CEO [in 2017] was just taking that whole thing and broadening it out. What does being top quartile mean whether you’re reserving, a capital modeler, an exposure management person, in claims or operations? Trying to drive that cultural strength and belief that being really good at what you do and working as a team can have this lovely snowball effect on the overall performance of the business.
We did a very good job last year on getting ahead of our reserve needs on the pandemic. We would like to be running at something in the mid-90s. If we have a very low cat year, that can go down to 90% or better and if we have a cat year over 100%. Effectively that’s what Covid did to us. The underlying business performed really well last year.
We still performed well against our peers, we haven’t had anything difficult or embarrassing around business interruption or event cancellation.
We deliberately don’t do a lot of SME retail business. We were running single figures of ones [business interruption policies] that were even within scope. Event cancellation is an area that we’ve stayed largely clear of for a long time. It’s not that we did some brilliant analysis that said, there’d be a pandemic one day and it’ll get hurt. It’s just a class we’ve stayed away from.
The grounding of Ever Given in the Suez Canal shone a spotlight on marine, what are you views on the general state of the market?
Marine for us is interesting. We’ve been mariners forever. It’s been really, really tough to make money in London market marine over the last decade with too many facilities and people chasing the same business. That’s better now because people have been shaken out of the class and forced to give up. We find it easier to see real sustainability in the long term. I can’t afford us to go into another decade of struggling to make any money in marine. We are growing a bit in marine specialty, and we are growing a bit in marine London Market but that’s pretty much just about getting rate on our incumbent portfolios.
You insure the nuclear industry, do you ever get protests?
No. The perception of nuclear power has changed so much over the decades. After Fukushima people got scared around what can happen around nuclear but the fundamental thing is nuclear is green energy. It doesn’t have a carbon footprint. And it also has this constant baseload. Nuclear has got a fundamental place in the set of energy production for the world even as we all push more and more towards truly renewable energy. We’ve been the leaders in nuclear ever since we took in Syndicate 1176 20 years ago and it’s been a great business for us. But it’s a limited size market. We’re the number one and we’ve got, tens of millions of income, not hundreds of millions. We see it as a long term part of our overall energy capability.
Do you deal with non Lloyd’s / London Market brokers?
Lonham based down in Ipswich deal with regional brokers. We’ve got both company paper and Lloyd’s paper so we can deal with brokers as we see fit. We always try to find brokers with proper expert knowledge in a particular area and have the right relationship with them whether they’re a Marsh or a small specialty broker based somewhere outside of London.
February 2017 to present
February 2017 to November 2019
CEO/Chief underwriting officer
January 2016 to February 2017
Chief underwriting officer
December 2009 to January 2016
Chaucer Syndicate 1084
January 2009 to December 2009
Deputy active underwriter
Chaucer Syndicate 1084
December 2002 to December 2008
Specialist lines underwriter / head of specialist lines
July 1999 to December 2002
Unit head – casualty treaty
January 1994 to June 1999
Various underwriting positions
July 1993 to January 1994
Hartford Fire Insurance Company
September 1991 to July 1993
NRG Victory Reinsurance
So no plans for a retail push?
No. We’re very much into having targeted relationships. We love this idea of trying to be meaningful to people – narrow and deep, we don’t spread ourselves massively wide. Because we’re specialty we work very closely with the people need us as much as we need them otherwise our model just doesn’t work. We don’t have the infrastructure to serve 2000 regional retail brokers. What we have the infrastructure for is sticking an expert in front of a broker who knows what he needs.
Why did you open in Bermuda last year, what does it add for you?
Bermuda is about access and expansion into US reinsurance business. A lot of brokers do a great job for us but our view was there was some business that got out of the US into Bermuda and didn’t get all the way to London. We wanted to make sure we could service that business. We’ve got a very small but highly skilled team there. We moved our head of property treaty, who is a US expert by background, to Bermuda. We’ve got the appetite and Bermuda gives us access to additional business that fits alongside what we already do in London.
That’s why we need people in Dubai, there’s a huge amount of Middle East and North African business that comes to London. But there’s some that gets serviced in Dubai.
Does this mean you’ll be opening more hubs?
I don’t think we need more offices. We will always keep our eye on that because business flows do shift around. If we feel there’s another hub trapping business that we don’t have the access to we want then that would be our reason for setting up. I’ve got no intention of saying ‘I just got this vision where we’ve got 30 offices around the world’ because I can’t quite work out what 20 of them would do.
You recently launched a university scholarship programme, what are you hoping to develop?
We’ve been looking at smart things we can do to help drive greater diversity into our business. We are all tempted to fish in the same pond for recruitment. We wanted to broaden that out, creating the scholarship. We recruit school leavers and we recruit grads. There was a group that we’d love to recruit as grads but they don’t ever become grads because of the financial barriers that that involves. Let’s see what happens if we put this scholarship out there that says, we’ll financially get you through university, give you the work experience, we’ll give you the mentoring. Does that create another flow of talent from a different social sector and different demographic?
Will you boost the programme further in future years?
Definitely. I’d love to do more. It’s all just a matter of how many can you do at once and how much it costs. [The application process to be the first scholar closes this month] then we’ll triage to find our chosen applicant. It could be really interesting. We will either get it right or it won’t work in which case we can learn and try again. I’m 100% determined we won’t give up on it.
You have a headcount of 500 including around 120 underwriters, what is the diversity of the business like?
We’ve got this similar issue that most people in our sector have – we’re very 50/50 in more junior roles in the lower age groups, but it thins out horribly, it just has done over time.
You had three underwriters recognised in this year’s Female Top 10 in Gracechurch’s London’s Leading Underwriter Report what did this mean to you?
We are proud of having those leading underwriters. The aim is to stop that thinning out effect happening. So that as you go all the way up through the business, you would have the same sort of 50/50 split.
So what more can you do?
We’ve set ourselves very clear targets about driving for more [diversity] in senior roles. Having more senior women underwriters is great and we have to keep making Chaucer the best possible environment for the best possible people.
Flexibility is key supporting them through their career, making them feel that Chaucer is culturally a good place to work and can work for them. We can create an environment where it suits their lifestyle that changes over time.
And then, of course, it’s about recruiting more talent in a very diverse way and retaining and promoting them. So they realise that if they’re good, they’re going to fly up through the business quickly. All the different things you can do is multi layered. You have got to try and do as many positive things as you can so that people thrive and want to thrive at Chaucer.
Why did Chaucer rebrand this year?
We’ve got a great reputation very much built on the fact that we’ve got really good people. We did a lot of work on this and what we realised is we wanted to pull it together with two things. One selling the old – that every department does its job really, really well. And the second bit, frankly, was to properly note the fact that we have become part of China Re and the strength and resource that makes available to us.
When a broker comes and sees one of our underwriters and they’re good, it’s not an accident. It is an organic part of what we do – making sure our underwriters know what they’re doing and they’re backed up by people who support them. We’re better at leading claims than almost everyone out there. It’s the whole service. And that was why we wanted to make a fuss about rebranding, even though we haven’t changed our name.
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Between 15 March and 15 May Post invited insurance employees, through emails, social media and via the brand’s print and online channels, to nominate and rate their employers on a variety of aspects including their management, diversity, work/life balance and whether they would recommend the employer to a friend. More than 2300 responses were received and more than 50 firms were nominated.
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