Catlin: Lloyd’s would have held back Convex roll-out

If 2019 global specialty start-up Convex had launched in Lloyd’s its rapid progress would have been hampered by the market’s restrictions, explains its co-founder and industry entrepreneur Stephen Catlin.

Speaking exclusively to The Insurer TV, Catlin said the group couldn’t have expanded at “the pace we’ve done it” if its main operating platform was a Lloyd’s syndicate rather than UK and Bermuda-regulated insurance companies.

Catlin – together with his former Catlin Group colleague Paul Brand – launched the Bermuda-headquartered Convex Group in mid-2019 with an initial $1.7bn of capital. But the business came of age in 2020, in its first full year of trading.

Despite the disruptions caused by Covid-19, Convex wrote more than $1bn of gross written premium by year-end and has now hired more than 350 staff, the majority underwriters and ordinarily based in the London office, as part of a rapid roll-out.

“The truth of the matter is, and I’ve spoken to John Neal about this quite recently, what we have set out to achieve at Convex we couldn’t have done at the pace we’ve done it at within the Lloyd’s marketplace as it is today”

Earlier this month, it also confirmed its capital base had expanded to $3.2bn following another successful equity issue last year, together with a recent $500mn preferred issue backed by Sixth Street.

The majority of the $1bn is insurance across a range of specialty classes, including property, casualty, energy, aviation and financial lines.

“The truth of the matter is, and I’ve spoken to John Neal [Lloyd’s CEO] about this quite recently, what we have set out to achieve at Convex we couldn’t have done at the pace we’ve done it at within the Lloyd’s marketplace as it is today,” Catlin explained.

The founder of Catlin Group added: “That’s just where the market is today actually and there’s nothing that can be done to change that, nor indeed should it be changed just to accommodate Convex, in my view.”

Catlin’s comments come shortly after Lloyd’s unveiled Patrick Tiernan as its new head of underwriting standards, with the executive set to take up the newly created position of chief of markets.

Tiernan – who will oversee market performance and distribution in his new role – joins Lloyd’s from Aviva, where he is currently managing director for UK commercial lines and global corporate and specialty.

Neal – like Catlin, a former Lloyd’s underwriter – had temporarily undertaken the dual role of market CEO and head of performance following the exit of Tiernan’s predecessor, Jon Hancock, last June.

Hancock won plaudits for ordering a clampdown on underwriting standards in 2018 following the market’s $2bn loss a year earlier. It has led to greater scrutiny on syndicates’ business plans and a clampdown on growth aspirations, which was accelerated following further losses in 2018-19 – although there was greater tolerance in the expansion plans of better-performing syndicates during the Q4 planning process.

Convex mulled formally applying to establish a Lloyd’s syndicate in 2019 and is known to have had high-level discussions with senior Lloyd’s executives, together with the new admissions unit, before deciding to initially focus outside of Lime Street.

One of Lloyd’s great advantages is the range of international licences that enables syndicates to write non-life business in almost every region. But Convex is writing business out of its regulated London and Bermuda companies – Convex Insurance UK Limited and Convex Re Limited – and utilises fronting arrangements where necessary, including Scor in Europe.

“Lloyd’s goes through the veins of my body, I can’t help it”

But Catlin – who entered the Lloyd’s market in 1973 and grew his eponymous insurer into a global specialty carrier with the largest Lloyd’s syndicate before selling to XL Group for $4.1bn – said Lime Street is still close to his heart.

“Lloyd’s goes through the veins of my body, I can’t help it,” he told The Insurer TV.

He added: “London remains a dominant wholesale insurance marketplace. It tends to be at the front of many discussions around the marketplace, around the world. And Lloyd’s is an intrinsic part of that. Lloyd’s itself is a City institution which is what, 350 years old, and very much part of the City fabric.”

And he concluded by saying that the decision to operate exclusively out of Lloyd’s is not necessarily permanent.

“Does that mean that we will never, ever have a Lloyd’s syndicate? Absolutely not. Does it mean that we are still closely associated with Lloyd’s? Yes it does.”

Click the link below to watch the full 15 minute interview with Stephen Catlin – including views on pandemic solutions and market rates – in the latest edition of The Insurer TV’s Leaders Voices series…