Aspen Insurance CEO explains how he is repositioning the company

“The previous management team were tasked with making the business relevant and securing growth. That was their mantra. Since we repositioned the business last year under our Global Management, Regional Execution model, that focus has changed.

“We needed an approach which recognised the challenging pricing conditions and the relative strength of the market for each of our products, with the aim of creating an optimal portfolio under this new structure. This has been successful and we now have a business with a strong, consistent foundation that is delivering valued products to our brokers and clients wherever they do business.”

That is how Stephen Postlewhite, chief executive officer of Aspen Insurance, compares the change in the business’s approach since he took the reins some 18 months ago. The former group chief risk officer and CEO of Aspen Re was given the job of repositioning the company’s insurance business and the goal of creating a business that consistently performs within the top quartile of its peer group.

Postlewhite’s appointment was made in sync with a number of other senior appointments and the key change was to transform the business from operating in a number of silos globally into a company offering a truly global approach offered and executed through carefully selected regional hubs.

The company developed global product teams and aligned their operations under a common framework for delivering products to the global market. On the back of this, the company now intends to explore opportunities in new markets driven by regional teams with access to this global expertise.

An example of this was the establishment of a Singapore office in early 2016 from which the company targets a number of Asian markets with its global product lines and expertise. Postlewhite says this has been extremely well received by the local market, and the team is having significant success in expanding its regional footprint.

To get from one business model to another, however, was never going to be a completely straight road. Postlewhite has spent much of the last year examining the company’s portfolio and using his expertise in capital optimisation and management to establish exactly how profitable different lines of business are and adjusting the portfolio on this basis.

This adjustment of the portfolio has had to be done with significant tact, however, Postlewhite admits. Aspen is reliant on brokers and he says the process must allow an element of give and take.

“You have to avoid a knee-jerk reaction—brokers hate it when a company suddenly changes its appetite for certain risk. That does not work, so we have taken the time to explain to brokers why we did what we have done and what we are interested in, so everyone understands our position,” he says.

“If anything, our approach now is actually simpler and easier to understand. People need to understand what you are doing or you are dead in the water. But we have excellent technical expertise and an excellent leadership team now. We want the right clients and the right business where we are able to supply thought leadership and offer a value proposition, as opposed to just capacity.”

He also stresses that the insurer has been tough where it mattered. “After we globalised the leadership team, we reviewed the renewals and, yes, in some instances they came back and said there was some business they would not write because they did not feel the pricing was sensible. We acted on that but it is a question of balance.”

Three segments

Aspen, which classes itself as a specialist insurer, categorises its insurance business into three main global segments.

The first is its property/casualty products, which it regards as the closest it gets to standard lines. Postlewhite characterises these lines as “competitive to very competitive” everywhere but despite this he also stresses that pricing and terms and conditions on international business are relatively stable.

“It is very competitive but stable and we are very selective in what we do in this area,” he says. “We could write a lot more business but we are selective and that is why we do well in a relatively difficult market.”

It is very much a question, he says, of selecting the right lines and opportunities. This was illustrated by the deal in September 2016 when Aspen acquired the renewal rights to a portfolio of regional UK property/casualty business from Liberty Specialty Markets (LSM).

Postlewhite explains that this represents a pocket of business it sees as appropriately priced and profitable. It also allows the company to cross-sell other products to this new portfolio of clients.

The second segment of business is financial and professional lines—FinPro—which includes a wide cross-section of business ranging from crisis management to terrorism risks, political risks and cyber.

While pricing on many of these lines of business has dipped in the last two years, many parts of this portfolio are profitable and have the potential for growth, Postlewhite says.

He says Aspen sees potential growth in a number of areas especially US professional lines, accident & health and political risk. Terrorism is competitive but the rates are still pretty good especially in the context of the belief that the risk of bigger terrorism losses is decreasing.

He says cyber is also an area of growth of the company, which has invested heavily in this line of business in the past two years. The challenge is, he admits, that many other insurers are now also targeting growth in this area, putting pressure on rates.

“Cyber continues to be an area of investment for Aspen and we have hired a fantastic team in the US to help expand our footprint in this area,” he says. “We are now very good in terms of technical expertise and I honestly believe there is no better team in the market.

“They are all qualified network security professionals and that adds to the expertise we have gained in this field over the past 10 years. It is not yet a soft market in cyber but rates are heading that way and there will be winners and losers.”

He notes that within this second segment probably the toughest line at the moment is US D&O business, where rates are now very competitive. On that basis Aspen has reduced this book dramatically in the past 18 months, and instead focused on related products, particularly US professional lines, which is a key business for Aspen in the US market.

The third segment includes marine, energy and aviation and Postlewhite describes this as the most challenged. Its biggest book is in London where there is intense price competition and, after seeing double-digit price reductions in some areas, it is being every selective on this portfolio.

“This is not an area to be bold in,” he says. “We try and differentiate and pick and choose the business we write.”

Room to grow

In relation to trends in pricing, Postlewhite notes that insurance contrasts with his last job heading up the reinsurance team in that cycles are more driven by local trends and events as opposed to the whole market shifting as one.

“I suppose it is conceivable that something big could move the entire market but it would have to be huge and a paradigm shift in the dynamic between risk and exposure,” he says.

Balancing out this pressure on some of Aspen’s existing portfolio, however, is its focus on growth in some areas. There are specific lines of growth such as railroad in the US and accident and health. Excess casualty is another as is commercial surety, which is enjoying strong growth.

But the company’s real focus now is offering products—new or old—on a global basis while also offering existing clients additional lines.

This is the case in Singapore, where the company started by securing marine and energy business but quickly saw opportunities in political and credit risk. It is now also looking to offer fine art and specie, leveraging its global expertise to do this through regional hubs.

A similar dynamic is taking place on the back of Aspen’s new US cyber expertise, which is now available on a global basis.

“Product contamination and recall is another example,” Postlewhite says. “But there are a number of examples of using our global reach to efficiently distribute products worldwide.”

The fact is, Postlewhite believes, that the market has changed for insurers with a global outlook in recent years. While the mainstream very large players have to maintain a very large global network, specialist niche players such as Aspen, do not.

Instead, it is more important to establish consistency of approach and appetite on a global basis and allow this to translate through local, regional markets—all while ensuring very good underwriting controls.

“We want clients to have a clear understanding of what we do and what we want. We are specialised and niche in our products and for us it is all about seeking localised opportunities. We also want to be fast and responsive and flexible. It is a hub-and-spoke model for us and when that model is executed well, it can work very well both for us and for our clients.”

Postlewhite believes the business is well positioned for the future. Aspen has developed its talent pool in the past 18 months and he feels it has the right balance between global product leaders and specialist underwriting experts in terms of the way they collaborate and are able to deploy human and financial capital to product opportunities and emphasise or de-emphasise areas of the portfolio.

Having walked away from some areas within the existing portfolio that did not meet Aspen’s long-term profitability expectations, he is confident the insurer can outperform its profitability targets and achieve growth in what remains a challenging market globally, but with selective opportunities.

“We are not the finished article yet—things continue to bed down in terms of the culture and structure. This is really part one of a five-year job,” Postlewhite says. “What we are doing is important to ensure the business is strong and profitable while also being well positioned for growth if the market turns or as opportunities present themselves.”