Holborn offers a ‘Swiss Army knife’ of solutions to clients

Insurers are grappling with a plethora of challenges the likes of which executives have not seen in a generation. But there are solutions. The key is being open to good advice and following the data and insights offered by your trusted partners.

That is the message from Stephanie Gould Rabin, senior vice president and chief strategy officer, and Chris McGrath, senior vice president, client solutions & corporate strategy, Holborn, speaking ahead of APCIA’s annual meeting this week in Chicago. They admit that times are tough for a lot of clients—but stress that many strategies and solutions are available.

“The challenges are great—but there are solutions,” said Gould Rabin. “At Holborn, we have developed a growing team dedicated to what we pride ourselves on – customised solutions for clients. 

“We are like a Swiss Army knife within the firm and for our clients: adaptable and efficient with multiple solutions tailored to the unique problems our clients face.”

The executives summarised the challenges their clients are facing, which are complex and multifaceted—but also very specific.

First, higher losses in property and casualty lines have meant many US insurers have lost a material percentage of their policyholder surplus (PHS) in recent years: More than half of a Midwest and Northeastern cohort have lost more than 5 percent of their PHS, one third have lost more than 10 percent of PHS and some have lost even larger percentages, Holborn estimates.

Resulting from a spate of catastrophic activity coupled with inflationary pressures, Holborn has experienced a much-hardened reinsurance market, which has probably peaked, but is expected to remain challenging, especially for property frequency covers. This has meant both higher rates and increased retentions, particularly for property-cat business. 

The resulting changes to reinsurance structures have meant that overall retained risk has increased dramatically, as measured by modelled catastrophe probable maximum loss to PHS ratio. “This puts a huge strain on companies and erodes the risk-bearing ability of the insurance sector,” said Gould Rabin.

She added that this means underwriting results are unprofitable: combined ratios for the regional Midwest and Northeast cohorts have averaged above 100 percent since 2022, with many companies well above 100 percent. 

“Underwriting losses put the focus on potential investment gains as the sole means for bolstering surplus. This effective reliance on the economy to drive success is simply not sustainable for insurance companies,” she said.

Cats and inflation

These are challenging outcomes, but they are not the exclusive drivers of the problem, McGrath said. The frequency and severity of cat events, particularly severe convective storms (SCS), and heightened inflation, including both economic and social inflation, are driving loss dollars much higher. 

“This impacts not just property lines but casualty lines as well,” he said. 

“All the challenges are intertwined—but so are the solutions.” Gould Rabin

More importantly, however, insurer rate adequacy—the price an insurer charges its insureds—has not been able to keep pace with the increases in reinsurance pricing. As a result, insurers can suffer serious consequences, and rating agencies are not shying away from taking drastic action. 

“Double and even triple downgrades in one year are occurring. Ratings downgrades impact reinsurance availability, capacity, and pricing, along with a company’s ability to attract and retain agents,” McGrath said.

But insurers struggling with these challenges should not lose hope. “Holborn works with clients on a number of solutions, but they need to be customised,” Gould Rabin said. “All the challenges are intertwined—but so are the solutions.”

A more immediately available solution is Surplus Relief. This can take many forms including surplus notes, low-lying excess of loss, proportional treaties, and structured solutions. She stresses that, in addition to negotiating and placing such a deal, Holborn has developed robust financial models that help clients understand exactly the benefits and tradeoffs that each solution may bring.

Second, Holborn helps clients with their fundamental underwriting and portfolio management. This includes assessing, modelling, and advising on pricing, risk selection, and portfolio optimisation. McGrath acknowledges the pivotal nature of the fine line insurers must tread between being competitive and being profitable.

“We’ve seen the largest uptick in client discussions related to underwriting strategies,” McGrath said. “The benefits to our clients are twofold and compounding: first, there is the expected improvement in underwriting profitability; the second is the ability to translate that improvement to reinsurance markets, which can drive down price by attracting reinsurance capacity, or by reducing limits required to be placed, and/or allow for more efficient structures to be designed.”

Another important solution involves improving enterprise risk management within insurers at board, management, and employee levels. “These solutions must be ‘right-sized’—customised to meet the unique needs and size of each client to ensure they are embedded within the organisation,” Gould Rabin explained. 

“Communicating effectively to all parties—including rating agencies and reinsurers—is every bit as important as doing the work itself. 

“This is a pivotal time for companies and finding the right balance of change execution while measuring and communicating the benefits is important,” McGrath concluded. 

Stephanie Gould Rabin is senior vice president and chief strategy officer at Holborn. 

She can be contacted at: stephanier@holborn.com 

Chris McGrath is senior vice president, client solutions & corporate strategy at Holborn. He can be contacted at: chrism@holborn.com 

For more news from the American Property Casualty Insurance Association (APCIA) click here.

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