Clear improvements on D&O rates coming: Rising Edge CEO Gouraud

London-based managing general agent Rising Edge was launched in May this year, with chief executive officer Philippe Gouraud joined by directors and officers (D&O) specialist Yoel Brightman alongside a number of senior hires from major global carriers and brokers.

The company is backed by reinsurance capacity from Vantage Risk, with the licence to write insurance provided by R&Q’s Accredited Insurance arm, and is focused on providing coverage on a wholesale business in the London market and across Europe.

Gouraud sat down with the 1.1 club, Intelligent Insurer’s online, on-demand platform for one-on-one interviews with industry leaders, to discuss how the firm is approaching its first renewal season.

With renewals coming up, prices are at the top of everyone’s minds, and Gouraud believes that the D&O market is definitely moving in the right direction when it comes to getting an adequate price for the risks on book.

That said, the executive knows from experience that this doesn’t mean the market can assume that higher prices in the short term will prove to be sufficient over a longer horizon, and cautioned that changes in regulation and client needs, as well as lingering uncertainty over claims from the COVID-19 pandemic, could weigh on future returns.

“Certainly what we’re observing today when comparing the rates that were there 18, 24 or 36 months ago is that clearly there’s an improvement on the rates. Are the rates adequate today?

“This is a very difficult question. If you judged, or tried to make that assessment, based on past experience, they should be okay. But there’s a big caveat here based on past experience.

“When you look ahead, in terms of underwriting it should never be based solely on past experience. The rearview mirror is maybe useful when you have some legacy issues to deal with, in terms of how big a hole you need to fill. But when you start from scratch, it’s looking ahead that matters,” Gouraud said.

“You need to learn from the past, but you need to look ahead. As I said before, there are still some lingering questions about COVID-19. There is all this increased reporting and the regulatory environment, imposing on corporations more disclosure—the more you disclose, either because you have to or because you want to. There are as many opportunities to get it wrong.”

For more content like this visit the Reinsurance Lounge

Shifts in the market

Gouraud particularly highlighted changes to corporate governance rules in the UK as one example of shifts in the underlying market which could affect the sector moving forward.

“Certain things should not be lost sight of. Look what’s happening in the UK: the government is looking at a new corporate governance framework, and a regulatory body has far more teeth to make sure that companies are better run,” he said.

It’s no longer essentially a question of: “Is that company financially viable? Are they applying the right accounting standards? Are they disclosing the right financial statements?” It’s becoming much more: “Is that company behaving the right way?” That is a much more complex underwriting process.”

The executive highlighted how reinsurers are facing “tough questions” over which types of companies to partner with ahead of Baden-Baden, with the market split between more traditional carriers and tech-based startups such as Rising Edge.

“Given current ruptures in the D&O space and the prospect of prices rising at a much faster rate than they have for some time, it is possible that the status quo could be shaken up ahead of the January renewals,” Gouraud said.

“We are in a very fortunate position which is that our capacity providers are committed to us on a long-term basis. We are strong and stable but of course, we have expansion plans, and our current success has attracted a lot of interest in the market, and we’re having discussions,” he said.

“If I were a reinsurer today, planning my meetings and wondering where I am going to deploy my capacity next year on D&O looking at the market that presents better signs than historically, maybe the question I would ask myself is ‘where should I deploy this capacity?’.

“There’s a big decision to be made, in terms of the traditional avenue and supporting traditional writers such as composite, global insurance, or to deploy the capacity towards more innovative, nimble startups, like ourselves, and some other new entrants in the market that are also doing an interesting job.

“It’s challenging the status quo a little. If I were a reinsurer, they would be tough questions for me to answer,” he concluded.

To view the full 1.1 Club interview click here