After raising a significant amount of capital in 2020, a trend which has continued this year, specialty insurer and reinsurer, Fidelis Insurance Holdings Limited, continues to innovate and sees opportunities across most lines of business, according to Dan Burrows, Executive Chairman of Fidelis Bermuda and Group Managing Director.
In 2020, equity and debt raises at Fidelis reached more than $1.3 billion, taking its total capital to over $2.5 billion as at June 30 2021.
Add to this a recent minority investment from US primary insurance giant The Travelers Companies Inc., and the fact Fidelis has been expanding its use of third-party reinsurance capital via its Socium franchise, which now manages in excess of USD 4.5BN AUM, it’s clear to see the company has grown considerably in recent times.
Against this backdrop, Reinsurance News spoke with Burrows about what this growing capital base means for the company.
“The increase in capital has really enabled us to continue the strategy of targeted growth with diversification. But with that increased capital base comes bigger line sizes, which means you can drive pricing in a hardening market,” said Burrows.
He explained that in 2020, Fidelis wrote 57 different lines across insurance and reinsurance. This number has expanded in 2021, and the larger capital base enables the firm to increase its capacity across most if not all of those lines, at a time when its partners need additional support and alternative solutions.
“There are new products popping up all the time such as intellectual property and so on, and ESG is obviously at the forefront. So, we’re continuing to innovate in those spaces,” said Burrows.
While more capital translates to bigger line sizes, Burrows explained that the main focus will be on seeing new opportunities in the market.
“I think there’s opportunity across most lines of business, be it reinsurance, insurance, bespoke and specialty,” said Burrows.
“So, specialty you can identify as being lines like energy, marine, aviation, and we’ve seen improved rating across all those lines of business. Bespoke is a little bit more difficult to frame, because in the context of it being bespoke each line is individual, and a lot of those deals are for deal facilitation or capital relief transactions,” he continued.
On the back of a prolonged soft market state, still dangerously low interest rates, prior heavy cat loss years and the more recent impacts of the global pandemic, market conditions remain favourable and rates have been moving in a positive direction, albeit less pronounced than some had hoped for.
There are, however, signs that rate increases are starting to slow in some areas, but market consensus points to a continuation of current dynamics at January 1st, 2022 and likely beyond, absent of course a series of significant loss events.
Discussing the operating landscape, Burrows explained that what really concerns Fidelis are what it calls the five C’s: Climate change, COVID-19, casualty claims amplification, cost inflation, and cyber.
“Now, each one of those on their own have really difficult issues to tackle as an industry, but as a collective, it’s nigh-on-impossible if you are exposed to them all, which fortunately we are not. But our concern is that the market views that most of these events are behind us, and the reality is we see them as developing issues that will continue to dominate the future,” said Burrows.
Adding; “The true cost of COVID-19 is really yet to crystallise. Then there’s loss deterioration from prior years. Then 2021 has seen Uri and recent European floods, as well as IDA so the attritional catalyst is there.
“So, we think that alone should stop any complacency regarding where we sit in the market cycle. We think because of those five C issues, then we would be optimistic that the good market conditions will prevail into 2022 and beyond.”