Pain relief: a challenging hard market drove the creation of Honan Re

In March, commercial broker Honan Insurance Group announced the launch of Honan Re. The new unit based in Singapore offers facultative reinsurance solutions to the group’s insurance partners and started writing business immediately following approval by the Monetary Authority of Singapore. The launch makes Honan the only Australian broking house to offer reinsurance solutions.

Eliza White, the managing director of Honan Asia and previously an underwriter in Hong Kong and Singapore with Starr Insurance Companies, heads the new business. She’ll be helped by Thomas Joyce, who joined from JLT Re in April as new business manager.

To discuss the launch, White joined the Re/insurance Lounge, Intelligent Insurer’s online, on-demand platform for interviews and panel discussions with the market’s leading players.

A long time coming
According to White, Honan Re has long been on the cards.

“It’s been part of the strategic growth plan for Honan since executive chairman Damien Honan first championed the company’s initial investment into Singapore in 2012,” she said.

Singapore was the obvious choice for it, as a central hub for reinsurance providing access to the international market—although the company did briefly consider Labuan, but “it’s becoming more difficult to establish in Labuan at the moment”, White noted.

Honan Re’s focus is on providing an international alternative for wholesale and reinsurance placements for Australian and New Zealand-based retail brokers. There are no plans in the short term at least to look at treaty business—“but that’s not to say it won’t happen”, White said.

“Our ultimate goal is to be the leading independent broker in Asia-Pacific that provides the alternative solution that many clients and cedants are looking for these days,” she said.

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But why now?
The answer is the hard market—the most prolonged that the region has seen in decades. “September 11 was big, but it didn’t last for this long in Australia,” remarked White.

This has made the launch of a reinsurer a necessity rather than a choice. “Given the size of Honan and our level of sophistication, having a reinsurance arm went from being a nice-to-have to being essential,” she explained. The local Australian market simply didn’t have the capacity to meet many of its clients’ needs, she added.

“There are risks that would have normally been written 100 percent by several local markets, and they’re now only just managing to find coverage in complex international placements. There’s just such a huge demand for this alternative that it was impossible to get deals done without it,” she explained.

From Singapore, Honan Re is able to access international re/insurers, including lead syndicates that have supported the Singapore platform. “We hope to provide a meaningful alternative to London,” she added.

Pain relief
Fundamentally, for White, the launch reflects a hard truth: that although many in the insurance industry will have welcomed the hard market, it can present significant difficulties for brokers and their clients. The market continues to be “extremely challenging”, she said, particularly for directors and officers, professional indemnity, liability and property lines.

While White acknowledged that the rate rises seen are both good and necessary for the insurance industry, for businesses that have faced unprecedented disruption and massive uncertainty, it can be the final straw.

Click here to watch the full video

“It’s different when you’re sitting in London with a stamp at the box and you’ve got a huge rate increase from when you’re a small business owner who may not be able to continue trading because of this,” she said.

“As a retail broker, you’re dealing with clients struggling to survive a pandemic, where their businesses have been absolutely shocked, and then you throw on a 200 percent increase on their insurance premium. We see it on the coalface: the pain that this inflicts on individuals.”

Honan Re should help alleviate the pain by providing an alternative source of capacity that can bring some price relief as well as creative solutions.

It will, White hopes, provide the group with an opportunity to differentiate itself in the Australian market by partnering with retail brokers.

“And I mean partnering, not taking advantage as some wholesalers do during the hardest market we’ve experienced in decades,” she said.

“One of our values is that we’re with our clients all the way, and Honan Re very much plays into that.”

To view the full Re/insurance Lounge session click here.