Ryan Specialty prepared for new surge of property cat into E&S market

Ryan Specialty Group is “geared up” for an expected surge of property cat business through the wholesale channel in both its brokerage operations and underwriting platform as a result of further dislocation in the segment, according to president Tim Turner.

The executive was speaking on the wholesale giant’s earnings call after it delivered a strong third quarter earnings beat with adjusted EPS of $0.24, compared to analysts consensus of $0.18, and surging organic growth of 28.9 percent which was more than twice that recorded in the prior-year period.

Analysts asked about how the firm was prepared for further dislocation in the property market after another heavy year of cat losses against a backdrop of climate change concerns.

Turner (pictured right) said there is no doubt that the property market is continuing to firm.

“It was already very firm… but aspects of these storms [like Uri in Texas and Hurricane Ida] were poorly modelled by many carriers. And so we see a constriction in the marketplace, with more dumping and shedding from the standard markets,” he added.

RSG’s founding chairman and CEO Pat Ryan (pictured left) said that the company had been “working diligently and vigorously” all year to bring more capital into its underwriting facilities.

And Turner said that RSG had also “geared up” on the RT Specialty wholesale brokerage side of the business.

“It was already very firm… but aspects of these storms [like Uri in Texas and Hurricane Ida] were poorly modelled by many carriers. And so we see a constriction in the marketplace, with more dumping and shedding from the standard markets”

Ryan Specialty Group president Tim Turner on prospects for the E&S property market

“We have lots of very top-rated property brokers across the country [and] we’re loaded up in the hubs. We can take a huge influx of property business coming into the channel,” he commented.

Turner added that the firm has also been building out its proprietary MGUs and underwriting platforms in property cat.

“So we’re ready for it. We believe the first quarter heavy buying season will increase the flow into our channel exponentially, so we’re excited about it. We think we can bring even more value to our retail customers,” he continued.

Turner specifically highlighted a doubling of capacity at nat cat-focused MGU JEM Underwriting Managers, which is accessed exclusively by RT Specialty brokers, as well as construction MGU Technical Risk Underwriters.

50-state binding authority operation

Also on the call, Turner said that the firm is on pace to build the first truly 50-state binding authority operation in the US.

RSG has previously highlighted what it sees as a significant opportunity to address the highly fragmented delegated authority market, where both M&A and panel consolidation are in their early stages, compared to wholesale brokerage.

“With the addition of All Risks last year, we now have a more robust infrastructure and an enhanced talent base for delegated underwriting authority firmly in place.

“Now we just need to continue to execute just as we’ve done every day. If we do what we do best, recruit and empower talent, train young professionals and make prudent strategic acquisitions, we believe we’ll be on pace to build the first truly 50-state binding authority operation,” said Turner.

The executive noted that the binding authority business has traditionally been conducted on a state-by-state basis, but carriers in the segment are increasingly delegating underwriting authority with a nationwide approach.

Insurers such as Nationwide’s E&S operation and AIG’s Lexington have been changing to 50-state distribution models.

RSG has been collecting 50-state appointments as it rolls up binding authority business on its platform.

“So today, we’re equipped and have enough product in 50 states where we can RFP with 100 top retail clients in anticipation of participating in the consolidation of those fragmented intermediaries,” he said.

Robust M&A pipeline

Ryan said the firm’s M&A pipeline remains robust, with “productive conversations” ongoing with potential targets to add to its platform.

“We will remain very active but disciplined with respect to M&A, and we’ll execute only when the opportunity is right,” he continued.

Turner added that M&A remains “highly competitive”, especially in relation to potential acquisitions for RSG’s underwriting management business.

With July’s IPO in the rear mirror, he said the firm’s M&A program is “back in full focus”.

“To put a point on it, today’s acquisition is tomorrow’s organic growth, and we hope to be back to you soon with more updates,” he said.

Ryan added: “We’re quite optimistic that we can sustain our past record of M&A activity. But we actually feel because of all of our growth and success – but also the IPO – that we’ve got an enhanced brand… we’re getting more calls from people, from sellers.”