Execs willing to meet will gain edge in ‘fraught’ negotiations: Convex CEO Brand

Negotiations around the year-end renewal will be “slow, difficult and slightly fraught” given the size of the gap between the expectations of buyers and sellers, according to Paul Brand, chief executive officer,  Convex, who described how  Convex has been ironing out some of the “kinks” in its system after two years of rapid growth.

Speaking to Monte Carlo Today via video interview hosted by Intelligent Insurer’s Re/insurance Lounge, Brand said that despite some positives around rates hardening, startups entering the industry and new capital being raised, this has been diminished by far more negative news that reinsurers must grapple with.

“From cat losses to COVID-19 to inflation to questions about the adequacy of reserves—you can go on and on. After the industry experienced some positive results, some people thought the industry might move the other way on pricing.

“But after recent losses and the concerns they have raised around loss inflation and climate change, I think the opposite will now be true. All that will drive prices firmer,” Brand said.

Against this backdrop, he welcomes the new companies and capital that have entered the market, believing the challenge to the status quo will be a good thing for the industry—“especially where, like us, they take a different approach to some of the traditional companies that means they can improve things and give clients something better. If the market was just a closed box, it would be very dull”.

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Building steadily

Brand said his focus at Convex for the past 12 months has been around building the team and growing the business. From a standing start, it now employs more than 400 people across its offices in London and Bermuda; it raised an additional $500 million in capital from global investment firm Sixth Street in January 2021.

“That put us in a good position to leverage market conditions,” he said. “But we have also been building steadily while also reworking some of what we did and ironing out kinks in the system. Fundamentally, it has been about growing our talent base and underwriting teams.

“Doing that during the pandemic was definitely harder. It has been very exciting and positive and the energy levels in the office are huge now, but it is definitely harder to interview people and hire them without meeting face to face.

“I am a great believer that this is an industry which you cannot learn from a book. It is about mentoring and training and the nuance of reading body language.”

On this basis, Brand believes that businesses that go back to face-to-face meetings faster will gain a competitive edge over those that are more cautious. “It is much easier to say ‘no’ over email than it is face to face. There is a lot of emotional intelligence that comes into play in person, which you cannot replicate over a video link.”

In terms of other major talking points for the industry, Brand believes COVID-19 will remain high up the agenda, especially in the context of illustrating the importance of transparency of coverage.

“It is clear that a lot of people had the expectation of more cover and that has resulted in litigation. We need to adapt so there is clarity in terms of what is covered.”

He said the use of data and technology should remain high on the agenda for the industry. “They are revolutionising every other industry but us. That is just a matter of time,” he said.

Finally, he agrees that climate change is a huge issue for the industry but he warns against generalisations. “It can be difficult to unpick the cause and effect of climate change. However, what is clear is that certain events are costing sometimes double what they would have five years ago.

“Exactly how much of that is due to climate change, no-one really knows,” he concluded.