Convex still weighing up Lloyd’s entry but remains cautious on cyber

Convex CEO Paul Brand has said the group is still weighing up the merits of a Lloyd’s entry as he acknowledged the near-350-year-old market is “in the blood” of both himself and founding chairman Stephen Catlin.

Speaking to The Insurer at the industry’s annual conclave in Monte Carlo, Brand acknowledged the market’s attractions, including its global licences, but added that nothing was imminent.

“Even if we started now, had a cunning plan, and worked hard in executing, I think it would be difficult to get a Lloyd’s syndicate in place for 1.1,” Brand said.

However, when asked whether Convex’s plans might include an entry next year, Brand replied that he “would not rule anything out”.

Numerous market sources have identified Convex as a likely candidate to enter the market at a time when the Corporation is seeking to encourage large global carriers to consider establishing a Lloyd’s presence.

This year, both Aviva and Fidelis have entered the market – albeit through different approaches – while a number of other large insurers including European heavyweights Allianz and Generali have been linked.

Launched by Stephen Catlin and Brand in mid-2019 with $1.7bn of capital, Convex has since catapulted in scale and is on course to write circa $5bn in GWP this year on its UK and Bermuda operating platforms, together with a US MGA arm. The group’s headcount has also grown to just beyond 450.

“We never say never. Stephen has got Lloyd’s in his blood and so do I. It’s an important market for us but I believe that it must get some of its core issues sorted out first,” Brand said.

Convex mulled formally applying to establish a Lloyd’s syndicate in 2019, but decided against it at a time when Lloyd’s was itself retrenching and less open to new business.

Brand told this publication that one area they are focusing on is the potential for cost duplication with running, in effect, two London market operating platforms.

“There are advantages to operating in Lloyd's, particularly the licences. It is undeniable that these are attractive and would open new possibilities for the group,” he explained.

“But these advantages are offset by some of the structural disadvantages in terms of additional cost of operating there. If we could solve all the problems on that front, then the prospect of a Convex Lloyd's entry would certainly be more appealing because those licences are highly compelling.”

He added: “At the moment, Lloyd’s adds costs, and as a centralised market, it should be reducing costs. If it was reducing cost and simplifying and enabling broader access to licences and perhaps some of the good effects, then it becomes a no-brainer for us. It hasn't quite got itself in that position.”

One subject that Brand did provide an affirmative answer on was cyber insurance. The London-Bermuda carrier has consistently opted to keep cyber out of both its insurance and reinsurance portfolios and Brand said this strategy is unlikely to change anytime soon.

“You will not see us suddenly begin to underwrite cyber insurance in a major way,” he said, flagging concerns over the concentration of global cyber business currently written out of London.

“Why does London have so much cyber? London's market share, Lloyd's and non-Lloyd's, is about 35 percent of the global cyber market. That level of market share is two or three times larger than its next largest line of business.”

The executive dismissed any notion that Convex is under pressure from clients to underwrite cyber, pointing to softening rates in the class.

“We choose not to write cyber, and I certainly don't mind other firms writing cyber, but I can't understand why anybody when putting their portfolio together would want their largest share to be in what must be the most uncertain line,” he continued.

Brand spoke to The Insurer after Convex in June had its ratings outlook revised to positive from stable by S&P Global Ratings, with the agency also affirming the carrier’s A- insurer financial strength rating.