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Established in 2004, Leader’s Edge is the award-winning content platform for The Council of Insurance Agents & Brokers, covering legal and legislative issues, international business and regulation, management trends and best practices, technology, and more. Leader’s Edge is written and recorded for large and mid-sized commercial insurance and employee benefit executives around the globe.
I would start out by saying I believe that the core principles and qualities of a good, strong underwriter haven't changed over the years, that the evolution of technology is enhancing outcomes in areas like predictive analytics. And really what all of these techniques do, create more risk available information for the underwriters.
Sandy Laycox:Welcome to the Leader's Edge podcast. I'm Sandy Laycox, editor in chief of Leader's Edge. In this podcast sponsored by Axis, I talk with their head of North America, Mike McKenna, who is focused on both the retail and wholesale businesses. A year into this newly created role, Mike discusses the company's pivot into specialty products on a broader basis, and how he plans to execute on the opportunities Axis sees in the market.
Mike McKenna:In North America, specifically, we've had a realization that there are market opportunities. There are market segments that we haven't gone into deep enough, as well as we have some additional capabilities that we wanna bring to the market. So as such, that was the impetus for the role. And my remit really is to build on this footprint of underwriting excellence, execute on a strategy that's both in force and one that I'm creating, and then look for profitable growth opportunities with our highly strategic distribution partners. And how are we gonna do that?
Mike McKenna:We're gonna lean into and cycle manage through our legacy product base. We're gonna look at new and additional markets as well as new products, like our LMM offering as well as some other specialty lines and really as a way for us to kinda penetrate some of these areas with the distribution partners that I mentioned earlier and create profitable opportunities for us and our shareholders.
Sandy Laycox:Next, we get into the specifics of particular markets in which Axis is focused, including taking a closer look at where they see opportunity in casualty amid the environment of social inflation.
Mike McKenna:Some of the things I'm focused on, and I could probably work in 3 different dimensions. So I mentioned deepening our strategic trading partner relationships with our brokers as one, expanding our product capabilities and then also looking at our segmentation strategy. So specific to product capabilities, we've seen, studied, and identified areas where we think we can add value as a specialist. We've hired teams of people in various specialties, like ocean marine in the US, construction in the US, inland marine in the US, and we've also added additional leadership across our environmental businesses and our casualty businesses. And the reason we're doing that is because we see opportunity for us to bring more specialist underwriting talent to those areas and really commit to a proper offering for our distribution partners.
Mike McKenna:We see the opportunity there. The strategic brokers are telling us they would like us to look at these spaces. And when we have that marriage of sort of want and need, that's why we're in those spaces.
Sandy Laycox:Let's talk a bit a little bit more about casualty for a second. I'm just curious because lately, we're hearing questions about, you know, the market is, you know, is it too soft? And I'd just love to hear your thoughts of getting into that line and where where you where you think it'll go.
Mike McKenna:Yeah. So so at Axis, we have a long and storied history in the casualty space. We write the predominant, portion of our book in the wholesale space in our primary and excess casualty books. At the moment, you know, there is a market sort of sentiment around casualty and looking at the overall cost of goods sold against the price and then also overlaying the trend factors. And we're looking at that as well, But we do see some opportunities specifically in the excess casualty space.
Mike McKenna:We have an underwriting strategy where we're reducing our limits. We're looking at our geographic footprint of offering as well as we're in a marketplace that we can still achieve rate, and there's quite a lot of market phenomenons that are happening that are driving that. We have business flowing from the retail sector into the wholesale sector around the phenomenon of social inflation. As an example, Cost of goods sold is rising. Companies are realizing.
Mike McKenna:Maybe that some of the loss picks from prior underwriting years are not where they need to be, and that's fueling sort of this impact in the E and S casualty space in particular. On the construction side for us, we we've committed a team of folks to look at construction on the infrastructure side in relation to what's happening in the infrastructure spending bill as an example. Yep. Larger projects, we can bring expertise on the primary side, on the excess side, in a lead position, and then a follow-up position. And, again, it's when when business and as well as, infrastructure is being put together and being built, and we we feel like we can bring that expertise to the table.
Mike McKenna:We've employed loss control folks to help us on that end, and we're committed to that market space. And we do have a sizable presence on the construction side out of our London operation, so it's a natural progression of some of the talent that's in the organization.
Sandy Laycox:The conversation takes a more operational turn when we discuss serving the lower middle market customer segment. Mike discusses what it has taken operationally for the company to best serve these clients.
Mike McKenna:It's a customer segment that we've traditionally not focused in on, and some of the items that we have implemented to go and look at this market space have been, we've actually separated our teams. We've added a team of lower middle market specific specialists in the wholesale sector as an example. They will be looking at property, primary casualty, and excess casualty, focusing on accounts with revenues in the $100,000,000 range, which is on the lower end of what ends up into the wholesale channel, and we have dedicated teams to handle that business. And we're also looking at servicing capabilities to speed up the process through technology, data ingestion, quick to quote. And usually in that space, first to quote can end up being first to bind.
Sandy Laycox:That was gonna be my next question on is it are they a more tech driven service group versus, you know, a large large clients?
Mike McKenna:I I would say that we're the industry is moving towards more tech driven results. In the space that we're targeting between $10,000 a $100,000, that's considered more of the, I would say, tech is coming to help that industry. Digitalization when it comes to submission, data transmission is coming to the forefront and we are employing technologies to help that process. So we're a little bit above the contract binding space where you would see more API driven and more straight through processing. But we're trying to implement these strategies to sort of soften the cycle between complex underwriting and more, risk adjusted sort of underwriting techniques.
Sandy Laycox:As we move into new tools and technology, I ask Mike his thoughts on the evolution of underwriting, given his background as a chief underwriting officer. And then we get into climate change and the new Lloyd's syndicate.
Mike McKenna:I would start out by saying I believe that the core principles and qualities of a good strong underwriter haven't changed over the years. I I believe that the evolution of technology is enhancing outcomes in areas like predictive analytics, like sophistication in deterministic as well as stochastic and probabilistic modeling on both the property and liability side as well as the emergence of AI. And, really, what all of these techniques do, create more risk available information for the underwriters to really augment their empirical experiences and the empirical loss data that we have to, to impact the pricing in a positive way based on better, stronger, and more predictive information.
Sandy Laycox:Do you feel like the industry has that in the in the Nat Cat space currently, enough of that kind of data?
Mike McKenna:I I feel it continues to be an evolving science. I I believe from a Nat Cat perspective, the modeling agencies have done a really good job at expanding their capabilities, adding new regions, adding new perils, taking the substantial amount of lost data that's available and applying it to those models, creating different outcomes specifically to these barrels. And in the United States alone, we can see the impact of severe convective storm as an example. It used to be a secondary peril, and in my opinion, it's a primary peril now based on the amount of damage that is being done from the SCS activity in the US in the industry as well as to the individuals affected.
Sandy Laycox:And you see that a lot. The convective storms are really driving a lot of loss in Europe and as well.
Mike McKenna:It it is definitely, an impact of global warming. We we see it. We we see it in the results. There are a lot of other factors that impact it as well, more coastal sort of building, which is creating it as but but we think climate change is definitely real and here to stay. And we think the modeling agencies are doing a nice job at helping us understand that risk factor and also, you know, being careful on how we look at aggregations as an industry as well as at Axis.
Sandy Laycox:Mhmm. Well, you did a great job transitioning that for me. We I was going to ask you a little bit in the climate change area. Axis is committed to supporting the clients transitioning to low carbon. And I'd just like to hear a little bit about, the work going on in that space, and you I know you all have a new Lloyds syndicate, in that as well.
Mike McKenna:Yeah. We we've long been an insurer of renewable energies, and and the team globally works on offshore wind, solar, as well as newer technologies to support a greener economy, such as energy storage, floating wind energy infrastructure. Our our team of underwriters, engineers, and claims specialists are are globally covering these risks. And more recently, our team in London has launched a new proposition, which is syndicate 2050 as you referenced. And that is a syndicate that is, that is a recognition of our you know, one of our biggest challenges is to ensure the risks as companies transition from fossil fuel based, technology into newer, cleaner, greener technologies.
Mike McKenna:And we're gonna commit many, many products to this across our ocean marine business and cargo, for instance, some of our property risk associated with green technology, construction and builders risk, as well as operational risk as well. So we're very excited about the, opportunity for 2050, and we think it's a long term viable opportunity for a specialist to really bring value to the market. I would just like to say, you know, Axis is committed to the specialty marketplace. We see tremendous opportunity for us to continue to grow our business. We are open for business.
Mike McKenna:We are looking for talented individuals to join the firm. And we will continue to see opportunities for both the organization, the shareholders, as well as talented individuals. We place a high value on the employees, and we really look to cultivate and to build the individual development of those individuals that work for us. And we're excited about the opportunities for the group going forward. So thank you for the opportunity today.
Sandy Laycox:That was Mike McKenna, head of North America for Axis. I hope you enjoyed our conversation. You can find more LeadersEdge podcasts, including several others with Axis Leadership at leadersedge.com.