Tackling a challenging market head-on

It’s been a rocky road for many in the industry. Several of Lloyd’s syndicates have closed; others were forced to stop underwriting certain classes and/or territories, Miguel González Arrate, president of Baalnak, told Fides Today.

Several market players have also cut back, creating a shortage of capacity and an atmosphere of uncertainty, as new underwriting guidelines are still being drawn up.

Put simply, there are fewer underwriting entities with fewer writing capabilities. This is particularly the case at Lloyd’s, where capacity is set by premium. As a market player, we at Baalnak are experiencing and tackling this challenging terrain head-on.

Several years ago, we recognised the potential for a boutique independent broker with a regional practice. We also knew that, to succeed, this broker would have to break with the approach that has characterised the insurance business for the past 10 to 25 years.

There may be a range of ways to deal with the current and future marketplace, but several years ago we recognised that our path had to combine broking with underwriting. If executed carefully, this approach could allow the company to gain the trust of insurers, reinsurers, and fellow brokers, while also allowing the company to protect its portfolio and serve as an alternative for brokers.

We understood that this path would allow us to fulfil promises at both ends of the business. We could be there for our clients during their difficult times and produce profits for the reinsurers that entrusted us with their pen.

In 2009, we started writing cargo business (a market which continues to support our underwriting efforts). Five years later, we became a Lloyd’s coverholder.

We have always produced underwriting profit in our markets, while growing our portfolio every year, and we are a long way ahead of where we started.

We made serious investments in systems and procedures to meet Lloyd’s coverholder requirements. Those who support our underwriting endeavours appreciated that this investment, coupled with the profitable results we have generated since we embarked on this adventure, has allowed us to maintain our underwriting vehicles through difficult times.

A broker of clients

Even at reduced capacity, we remain the independent broker with the largest underwriting capacity in Latin America, as we are able to write cargo, stock-throughput, stocks only and terrorism.

Because of this, we are uniquely positioned to take advantage of the great opportunities this uncertain market is producing.

The word on the street is that the insurance market will continue to shrink in 2019, yielding an increasingly challenging 2020 with fewer active players, less capacity, and reduced premium income limits.

We know there are risks that were placed in Lloyd’s or in the London Market in their entirety which cannot be renewed completely, due to a lack of capacity rather than the nature or condition of the risk.

We also know this may be exacerbated in the months to come.

In other words, a good number of players are not able to take full advantage of the environment they are creating at the moment. Rates are reaching levels that, combined with good deductibles and sensible selection of wordings and clauses, should present a sustainable marketplace but these players are watching from the sidelines.

Baalnak is equipped with the tools to service the growing needs of existing and potential clients without compromising the interests of those who have and continue to support us through tough times.

We can work with clients for whom risk management is a priority, review accounts on their own merits and provide capacity where we deem advisable, instead of painting them all with the same, generalised brush.

Our philosophy—“be a broker of clients, not a market broker”—continues to set us apart, satisfying insureds, insurers, brokers and reinsurers.

Miguel González Arrate is president of Baalnak. He can be contacted at: miguel.gonzalez@baalnak.com