Experience is key to avoiding becoming a long tail casualty – Casper

The chief executive of new casualty MGA Casper Specialty UK has said the market is increasingly looking for experience and pricing discipline as rate hardening continues.

Bradley Knight, who joined the MGA from his role as deputy active underwriter and head of casualty insurance at Argenta, said Casper’s team boasts over a combined century of experience in the casualty market, with brokers and clients alike seeking expertise as the risks continue to evolve.

Casper was launched by Lloyd’s (re)insurance broker Miller Insurance last month (21 February 2023) to take advantage of what it saw as opportunities in the casualty sector.

It has been formed to write financial institution and non-US professional indemnity (PI) risks, explained a statement.

At launch, the firm was supported by capacity from Argenta, private equity firm Cinven and Singapore-based sovereign wealth fund GIC – Knight said the backing the new firm has received was recognition of the team’s long term expertise and results.

“There is a flight to quality,” he explained.

“Those who have written short term risks in recent years have suffered and some have been looking to redeploy their capital to drive risk diversity.”

Capacity exit

Knight added that the PI market had seen double digit risk adapted rate increases in recent years.

The market saw an exit of capacity following the Grenfell disaster, but this squeeze created new opportunities for those insurers who had stuck to their underwriting principles.

“We had seen new capacity enter the market and price risks at very low rates,” he explained.

“Post Grenfell, there was a contraction in the market but that did open up new opportunities for us, as the prices came up to a level which matched our belief in the adequacy of pricing.

“In financial services the rates have risen but are now flat to plus 5% and it remains a difficult market.”

Grey hair

Capacity providers are increasingly seeking to work with underwriters that have experience operating in hard markets, Knight explained.

“At present, it is a benefit to have grey hair in the market,” he said.

“We have the experience and we have seen hard markets and how to best handle the cycle, including when to take advantage when the conditions are in your favour.”

Knight added that, in the wake of recent market hardening, brokers have been working with clients to ensure they understand the market’s dynamics and pricing trends.

“If you are a strong lead, you can educate your clients and manage expectations,” he said.

“You need to explain if [a premium] needs to go up and also why – we have always been honest.

“Those that have not seen a hard market can be unaware of what is required to manage your way through it – the key is to be there for your clients when they need you.”

He added: “This is a long tail business and it can be three, four or five years before you may see a claim.

“We have to factor that long tail nature into our pricing, because if the claims does arise inflation will be a factor in the costs. You have to build that inflation into the policy from day one.

“As such, we need to underwrite five years ahead – there is always a temptation to write for today, but if you underprice the business today you can bet it will be underpriced when the claims come in.”