Arcadian to build E&S book through New York platform

Bermuda-based MGA Arcadian Risk Capital is looking to launch its planned New York operation by early Q3, writing on SiriusPoint’s US E&S carrier and targeting accounts in the tier below the large risk-managed business written by its existing Bermuda, Dublin and London teams, The Insurer can reveal.

As previously reported, the John Boylan-led vehicle – which launched last year with backing from SiriusPoint – delivered a stellar first year measured by top line as it ended 2021 with gross written premium (GWP) of $225mn, compared to initial forecasts of $135mn.

The top-line result was buoyed by strong market tailwinds with the MGA able to achieve blended rates that were up by between 20 percent and 30 percent.

In a release earlier this month following the publication of SiriusPoint’s financials, former Markel, Alterra and XL underwriting executive Boylan said GWP will be “materially greater” in 2022 as the MGA expands its distribution and product offering.

It also announced plans to open a New York office in 2022.

And speaking to The Insurer, Boylan said the US platform will represent more of a distribution play, writing the same lines of business but accessing it through wholesale brokers as an E&S underwriter.

Arcadian’s current portfolio is largely general liability and professional liability, with a small portion of the business – around $9mn in 2021 – coming from its recently launched property direct and facultative (D&F) book.

The long-tail portion of the portfolio is split roughly 55:45 professional to general liability and the property book is expected to more than treble in size in 2022.

The relationship with SiriusPoint means the expectation is that the MGA will effectively be able to “plug and play” into the infrastructure of the Bermudian (re)insurer’s E&S insurance subsidiary in the US.

Although the MGA sees strong growth opportunities for the proposed New York platform, Boylan said the caveat on the property business will be appetite around cat, with the existing D&F book heavily weighted towards international rather than US business and largely non-cat.

He also said the New York long-tail book will have a different profile to the portfolio written from Bermuda and Dublin.

Boylan described Arcadian’s offshore entities as “elephant hunters” in the largest risk management account space, targeting Fortune 1000 and the FTSE 250 clients through brokers Marsh, Aon, WTW and Lockton.

“The important thing for us is to contour the flow of business so we don’t end up building a book on the ground in the US that cannibalises what we’re already doing from Bermuda and Dublin.

“Instead, it will be an E&S wholesale play, looking at the next level down from the Fortune 1000 and FTSE 250,” he commented.

Growth momentum and larger limits

Arcadian’s expectation of significant top-line growth in 2022 after putting $225mn on the books in its first year is based on continued market momentum and having a full complement of bedded-in underwriters to target the renewals calendar.

“This time last year we only had four or five people and it was a truncated year from an underwriting perspective. With the underwriting teams that came on in Q1 and Q2 2021 there’s a lot of momentum that we can make up and we have already started to make that up in 2022,” said Boylan.

The MGA has also been actively building out its infrastructure after initially outsourcing services such as finance, accounting, HR and IT and now considers itself to be a “mini insurance company” with around 30 employees and more underwriting positions to be added on the ground in the US.

In 2022, Arcadian expects to shift the limit profile of its portfolio.

The current long-tail portfolio has an average limit committed of around $7mn per account, with an average attachment point of about $100mn.

That represents a cover ratio of around 32 full-limit losses for premium to be wiped out, in line with a classic low frequency, high severity play, said Boylan.

“We view this as a construction project and we are building something here. Our underwriters have put the first storey on with $7mn limits and are now instructed to put the second storey on the building. We have more limit to deploy and we are doing that right now,” the executive explained.

That means depending on market momentum the average limit deployed could increase from $7mn to $12mn by this time next year.

And Boylan believes there remain strong tailwinds in the market.

“Terms and conditions are still conducive to book-building. We have a very experienced cohort of underwriters and the market is still with us to build so that’s exactly what we’re going to do,” he said.

He added that there could be further adverse development on the 2015, 2016 and 2017 underwriting years, such that the current market environment may be sustained for a little longer than some think.