EXCESS AND SURPLUS LINES INSURANCE
Pivix CEO: Reinsurance Costs, Prior-Year Development Pressure Casualty Insurers
SAN DIEGO //BestWire// - Mike Miller, chief executive officer, Pivix, said general liability insurance is likely to face continued scrutiny at the corporate level, with pressure for rates to increase rather than decrease. Miller spoke with AM Best TV at the 2024 WSIA Annual Marketplace, San Diego.
Michael MillerView the video version of this interview here.
Following is an edited transcript of the interview.
Q: Casualty concerns took center stage at Monte Carlo this year. What are the challenges and the most-challenged lines?
A: It's hard to make general comments anymore about any line of business because industry's gotten so good at bifurcating and breaking down parts of lines of business, but casually in general is being challenged on several fronts.
No. 1, and it's stabilized, but reinsurance costs have gone up, we all know that. As reinsurance costs go up, obviously it puts pressure on your pricing structure. But there are other things that I understand companies are experiencing, which is prior accident year development. Once that happens, that puts pressure on your current accident year picks, you kind of get a double whammy from that.
Then you have, and I don't think this may be coming into focus yet, but if interest straight start falling, investment income is going to start falling, that's going to put some pressure on returns on capital, etc. I think that's another thing that's coming. I look for indications that will keep pushing a line to be successful or pricing to stay where it's at or get better.
Then there's some other things like inflation in general. While that's calmed down in the United States, it still ran a couple years of, you know, six, seven, eight, nine percent. Then people talk about social inflation, the impact of that is sporadic. It's not like across the board, but if you get hit with one, it's certainly relevant to you. I think there are a lot of things happening on general liability that will make it a line that will get a lot of attention at the corporate level, and sometimes that's good.
I mean, it will keep putting pressure on let's not start discounting rates just because you think maybe you're a smarter underwriter than anybody else. These are things that hit everybody. I think across the board, GL will be a line that will be challenged. Specifically, you get into things that we would all know about like daycare centers and, places where sexual molestation or harassment or things of that sort tend to get to headlines so those may be more stressed than maybe a GL policy on a local business, a construction working job site or something. My view of GL is that the pressure will be for rates to go up not go down.
Q: How is all this going to impact the E&S over the short term and in the mid term, as well?
A: I think E&S is in a great position because one we can respond to those pressures immediately. We don't have to file rates. We don't have to file forms. We're in a great position to respond and that's what E&S is all about. It's responding to needs in the market.
If these pressures start hitting the standard lines companies, they're going to start pushing some of that business back into the E&S market. Which has been going on for a period of time here. We should see more business coming into the E&S marketplace. We have the tools to deal with it. We can deal with it immediately.
The question is going to be, how good are you at your data? How good are you at making decisions, deciphering what's happening to your book, looking ahead? All those challenges that an insurance company faces when you sell a product that you have no idea what the outcome is going to be until several years later.
Q: You are the former president of Scottsdale E&S. You spent a lot of years on the carrier side. Why launch an MGA? Why now?
A: Now it's still a great market, E&S is in my blood. It's in the blood of the team that I have put together there. There are four of us, so we're actually doing the same thing we do as a carrier, we're just partnering up with somebody else's paper. We can make this move into the marketplace much quicker than going out and trying to find a significant amount of cash to build a carrier company. We do the same thing. We have the underwriting expertise, we have the knowledge, we have the experience, we have a tech platform that we've already built that's proprietary to us.
We know how to service customers, we know the distribution systems, we know the people. We're basically doing the same thing we would do as a carrier in an MGA/MGU, and we're partnering with somebody else's paper. We're excited about it. Actually, I enjoyed doing something new and different, and so this is a bit of a learning experience for me in some respects, but at the same time taking advantage of the skills that my team and I have developed over the years.
Q: You've been on both sides of the football now, carrier and an MGA. How can an MGA distinguish themselves to their carrier partners?
A: I think No. 1, it's your experience and knowledge because you are the profit decision-maker for that carrier. If you say "well, I'm a distribution point, I don't have to carry the risk," you really do because you have to protect your capacity provider. We have all those tools in our bailiwick to protect our provider.
I have a good CFO (and) chief actuary that is really steeped in the E&S marketplace so he's going to be able to help us help the carrier define what is it that we need to do to adjust whatever is happening in the marketplace because things are dynamic, they change all the time. If you sit back and wait, you're going to be in trouble. You have to be proactive and we think we are proactive and we've been through these cycles, we've been through these markets.
We really do understand how to run a company as an MGU, protect the capacity and also the reinsurance market that will help play in this realm. I think to be successful, you have to have all those, and then obviously, we help a company get into a marketplace without building a platform, without hiring people, so we bring to them a quick entrance to the marketplace that they wanted to get into, but don't have to spend the money up front to do it.
View this and other interviews at http://www.ambest.tv
(By John Weber, senior associate editor, AM Best TV: John.Weber@ambest.com)