XL Group’s senior executives recently told analysts from Keefe, Bruyette & Woods that their portfolio underwriting initiatives through facilities are performing in-line with expectations, opportunities that the company may not have had prior to the merger with Catlin.
Forming XL Catlin was all about scale and relevance in the insurance and reinsurance market, as the executives told us all at the time of the deal going through and it seems to be paying off.
XL’s senior management told KBW analysts that the re/insurer is seeing an increased amount of underwriting business since the merger, with both submissions and quote activity higher than before.
Having an increased visibility of underwriting business in the market is not always useful though, particularly if opportunities start to flood in from lines of insurance and reinsurance business that are not its main target.
But the analysts suggest that the higher level of quoting suggests that the new submissions coming in are in targeted lines of business for XL Catlin, and that management’s reports that the hit rate of bindings to quotes has actually decreased also reflects underwriting discipline in a challenging market.
Additionally, the management told the analysts that they are very comfortable with their portfolio underwriting participation in the Aon Client Treaty facility, so far, with the performance in-line with their expectations.
This is an opportunity that the XL execs do not believe they would have had before the merger with Catlin, and while the analysts note that facilities can come with risks the better resourced and larger underwriters (like XL) are more able to manage these.
CEO of XL Mike McGavick noted that the company has not yet joined any other facilities, despite having received offers to do so, but the analysts said that there are likely to be more as the industry’s need for efficiency increases.