Ep260 Louise Rose TransRe: Spotting the Tipping Point

I'm Mark Gagan, you're listening to the Voice of Insurance podcast, produced an association with Advantage Go. Pick and choose your own Best of Breed in Short-Tech and Data Providers with Advantage Go's ecosystem. Today's guest has one of the broadest international re-insurance roles of anyone I've interviewed on the podcast. That's because Louise Rose has oversight over everything that Transread does outside of the Americas. But Louise has been on the show before as part of the annual Monte Carlo special episode, but it's wonderful to have the time for a comprehensive examination of the state of the re-insurance world. And that's exactly what you get today. We cover everything from the trajectory of the market to Transread's strategy as it looks to gain a stronger foothold in continental Europe and the Asia Pacific region. AI, cyber, MGA's and the state of the casualty market all get a thorough work over. Louise is in her 29th year at Transread and is always direct in her communication style. It's refreshing and makes for a highly informative and valuable encounter. Enjoy the podcast. Louise, welcome to Voice of Insurance. Thank you very much. For anyone out there who doesn't already know you, why don't you just briefly introduce yourself to the audience and run us a bit through how you got into insurance in your career to date and how you got to where you are now? Sure. I think like most of your listeners, Mark, I stumbled into this business. It was probably quite a lucky stumble, I think, with hindsight. I was a bit of a late-comer as well. I studied for four years in Italy and stayed on in Italy for a few years afterwards. What were you studying? I was studying European Business Studies and I worked as an interpreter, free-lands, for about three years after graduating. So I actually didn't really come back to the UK until I was about 25. So I'm sort of a little over 31 years in the business and I have been lucky enough to spend 28 years of those with Transray. So your Italian must be pretty good. It's pretty good. It's not quite as good as it was all those years ago, but I holiday there quite frequently and it certainly does come back. So that's good. So basically I've come up through the Underwriting Channel. Short-tailed Treaty is really my background, although I did start out very originally doing engineering facultative. So I've done property, engineering, aviation, A&H. About 70 years ago in 2018 I became deputy CEO for the London subsidiary here and succeeded my old boss Jeff Peach in 2019 just before COVID, timing is everything. And then earlier this year my role was expanded and took on the wider international briefs. So I now look after all of the business units outside of the Americas. So it's pretty much rest of the world effectively, isn't it? Yes, pretty much. Anything outside of the Americas falls under me in my mind. That's amazing. I must be really accumulating lots of MIs. I certainly am. Yes, and I'm figuring out how to manage jet lag. So President of International, you run, Trans-Ris London, Europe and Asia as in effectively rest of the world that's not Americas. Give us a sense of the scale of that business. How many offices, how many people? Yeah, absolutely. I mean, look, when I joined 28 years ago we had about 35 people in London and wrote about $250 million. London's now over 100 people and the wider international region, including APAC in Europe. We have 10 offices spread across the region, headquartered here in London. Three underwriting outlets in continental Europe and five in APAC. We're big believers in local representation, local people with local knowledge, understanding the culture, local language and really writing the business as close to source as we can. You always think about when it was transatlantic re-backing the early days, but you always hear you've been in London for a very, very long time. Yeah, we actually missed our 40th anniversary that was in Covid, so I guess we'll have to do something for 45. But yeah, 1982, I think we started out here. Actually, the very first overseas office for Trans-Ris actually in Tokyo. I think I'm right in saying that we were the first overseas registered re-insurer in the Japanese market and we're still there. I suppose is that something to do with the old AIG connection? But very possibly, yes. I mean, I think many of your listeners will know we were born out of an internal sort of AIG vehicle. But it was a very, very long time ago. Very, very long time ago. Yeah. So when you're looking across the world, what's your strategy? I mean, do you have an overarching strategy? Do you have to have different strategies for different areas? I think you do have to have different strategies. I mean, look, as I said, we're very, very keen on writing the business closest to source. I think, as I spend more time in our regions, particularly APAC, beginning to realise there's quite a lot of product differentiation. It's not just PNC. If I think about our London portfolio, we have about a third or third or third is property, some form of casualty, including motor and some form of specialty. Now, it's not hard and fast strategy to have that split anywhere else. But it's just really to sort of challenge ourselves around product to make sure that we recognise local nuance in product. And I think what's very important, though, as well, is that we export all of the knowledge that we've built up in the organisation across all the different regions and make sure that we really get that know-how, that knowledge, that expertise to our clients wherever they are. In terms of that strategy, sometimes the only disadvantage of writing things locally is, do you end up with a higher expense base or do you have to make sure, be very careful, before you open an office to think we're definitely going to get the volume of business that we really need to support that infrastructure? Yeah. I mean, look, we operate pretty leaner-mean. I'm sure all of our staff would tell you that if you ask them. And, you know, there's economies of scale. We don't have every single product line represented in every single office, but Trans-Ry writes pretty much all major non-life lines somewhere in the group. So our challenge, and I think we've got a lot better at it in recent years, is, as I say, to make sure that we export that knowledge that we support the local teams so that they can develop the broadest spread of business supported from the two larger hubs which are New York and London. And when you're out there in the marketplace, what's that sort of brand awareness you're trying to create? You know, what do you want that broker or that seedant to think of when you think of Trans-Ry? Oh, I know they're really specialists in this thing or actually they're really going to cross the board partner that they're really handy because they could probably write the whole bouquet of everything that I do and will have that kind of relationship. What sort of image do you want to project? Yeah, I think it's a really good question because I think it's evolving. We were born as specialists, really. We started out and still have an extremely strong casualty franchise, particularly in North America. So that isn't all that we do at all. And as I said, particularly here in London, we're a third or third, a third, specialty plays a big part. So I don't think the two things are mutually exclusive. I think our clients are adapting and evolving how they buy reinsurance. If I think about when I first came into the industry, they were all buying a lot of regional covers. Even the largest global buyers had quite regional strategies. That has changed. So you end up with sort of yes, you can be writing something I don't know. Exactly. Exactly. Six or seven programs for one of the large buyers. And that has changed a lot. And there is definitely a shift. We sense that shift towards sort of a more holistic approach. But we think you can be both. What I notice when I'm traveling around is not everybody wants to be treated the same, not everybody wants you to approach them in the same way. So I think the most important thing is to listen, actually, to what your clients are telling you. And work together. Communication is key here. You're single one of our clients as a partner, but they want us to partner with them in different ways. And we just need to spend time to understand what that looks like for them and find mutually successful ways to do that. And I think we're making great strides in that. So it sounds like you don't necessarily want to be specifically a generalist with a deep relationships of philosophy or neither a specialist, but you want to be whatever the client actually wants you to be. Well, I think it's about bringing your specialist knowledge to the relationship that the client wants to have with you. That's why I say I don't think the two are mutually exclusive. I don't think one is right and one is wrong. The absolute key, I think, is communication, transparency and openness. You know, we'll have clients that come to us and say, look, this is not a core purchase for us, but we'd really appreciate your support. We're fine with that. We can work with that. Where disappointment comes in is when both sides, actually, pivot on strategy without necessarily a good lead in time in a communication. And that's something that we always tried to avoid. Interestingly, we were saying about that consolidation in the, certainly at the higher end of the insurance. The top 10 global insurers, for example, was 30 years ago they probably would have had, I don't know, a good and so almost a new normal number of regionalised treaties in different lines, but we had four or five hundred contracts. And of course, somebody at head office said, look, actually, it's got to be a better way of doing this. Yeah. And, you know, they would centralise them onto their sort of own in-house reinsurer, for example. And then they buy a massive retro out of the top. I suppose as a reinsurer, they say, well, this is fantastic. It's more efficient for me as well. It saves me having to deal with so many different bits of paper. And also, it's incredibly diversified contract. This is a very solid right, but it's only sort of, it's gone down from 450 contracts down to about five or whatever it is. So I probably only need one office to write that. But you've still got that regionalised office structure. Is that because obviously, the global top 10s of the future probably going to come out of some regional? Yeah. And I think what I'm realising the more I travel is that there's a lot of product differentiation. Different markets, and I'm probably thinking more about APAC here, there's very different markets in APAC. There's some very mature, established markets like Pan and Australia, and there are markets which you would describe as more emerging. This is almost more life and credit and the sort of stuff. Exactly. A&H, but also a very different structure to the intro. There's been less M&A. We've seen in the more established markets, US, Europe, a huge amount of M&A. You end up with these megabias as it were, huge amounts of consolidation. You don't have necessarily seen that to the same degree in some of these emerging markets. So things like solvency covers, different product types. But again, it's very difficult to do that from. remote regional hubs or to do it successfully because you really need to understand the clients spend time with the client, understand the motivation for purchase and the claims environment and the legal environment. So all of these things, I think, even with global clients, they're putting all of their business globally into a lot of these protections, but that business is not homogenous, it's not uniform. There's a huge difference between the US casualty environment, the legal framework versus other parts of the world. So those local insights that we can build to get to know our clients' regional business battery might be protected in a global treaty, but it doesn't mean to say that there isn't significant variation and nuance in the underlying portfolio. And that's really important to understand. And sometimes, of course, the local regulator quite rightly wants to see that that business is being properly priced as it's seeded that they're not sucking out capital or sucking out profits out of that jurisdiction, for example, without paying the right levels of tax on all the other things, for example. So, again, often it seems that the global renter that global office is still valued, isn't it, because it's almost providing the price for that session that's going to go up and it might end up in head office anyway, but so you'd still need that local validation, isn't it? Yeah, I mean, you know, look different companies have to have different models. We just remain very committed to having a regional presence and really understanding local markets and local culture and local nuance and being able to support whether it's a small regional local client or a large global's regional business. We just do believe that the outcomes will be better if you have a broader understanding of the portfolios that you're protecting. And you pick some nice partners and they grow fast and you grow with them and you help each other. Absolutely. And this comes back to the question earlier around do you want to be a specialist or seen as a more holistic supporter? You can be both and different clients need different things from you at different times. A startup or a business that's maybe in the throws of an acquisition or a sale has different re-insurances and probably can't predict quite what their reinsurance buying is going to look like in the next few years and they want one approach. And then you have books which are more stable. I mean, everybody's portfolios are evolving all the time obviously, but probably in terms of product mix and it's more stable and you know, you can look at those clients in slightly different ways. So it's really horses for courses. The key is, as I say, I think it's to listen and understand the motivation for purchase. I think that's one of the first questions that we tell our underwriters. They should be asking of their sedance and their broker partners. And I suppose there's also that about that of course all their students, their security committees, they're all love to just do one contract and go home. But at the same time, of course, they need to have diversified re-insurance relationships. Yeah, absolutely. And can be a little bit cyclical. You know, we've seen periods of consolidation of panels and then the thinking will shift to more diversified panels. Again, we're obviously one of the strongest races, balance sheets out there. So hopefully in everybody's thoughts and plans. So this is nice security to have. This is going to probably enhance the overall security of my programme rather than detract from it. Exactly. Let's talk about the market. Well, the markets. I mean, there's so many. This is the whole world. Yeah. It's difficult to describe. I'm sure because it's temperature is very different in different places at different times in different classes, different territories. But just generally, how would you describe the state of the re-insurance market at the world? The global re-insurance market at the moment. I would describe it as transitioning. I think there is clearly pressure in the vast majority of lines and we'll come on. I'm sure to talk about US casualty shortly. And look, everyone can do the maths. I think we come through original pricing and obviously re-insurance pricing. A strong period of rate improvement, not just rate, structures, terms and conditions. So for many lines of business, you're coming off, you know, maybe a decade high rating environment. So it is fair to say that pricing can tolerate some degree of softening. What I think our industry has historically been terrible at is spotting the tipping point. And I think that's always a difficult part. To know where you're actually pushing quickly gone into inadequacy. Yeah. Good news on the upturn takes time to manifest. And that's the same with bad news on the downturn. And I think there's a really good example of that right now in the US professional space, professional liability. It obviously went through a period of significant hardening in the sort of 21, 22 years, but it has been falling rapidly since then from sort of 23 onwards consistently and at a fair rate of knots. But we won't see for some time the impact of that. Now that might explain why it's continuing on its current trajectory. It might be slowing a little bit. But history would suggest that that line of business has passed the tipping point. And I think the danger right now for the market is not the pricing in 25 and probably not even the pricing in 26, but the danger is going to be a complacency around spotting that tipping point. Because as I say, the annual financial results lag on the upturn and the downturn. So we would say there is some opportunity out there. Rates are generally coming off peaks for sure. If I think about property, we had a horrific period from sort of 2017 through to 21. And then the last few years property has been the cash cow quite honestly. So inevitably that leads to some softening and we'll be getting to see that. I think on the specialty lines, that's very interesting. It spans quite a broad range of lines, marine aviation, some of the financial risk terrorism, quite a broad spectrum there. And if you just look at the uncertainty in the world, whether that's pure geopolitics or whether that's uncertainty in the way some of the losses are going to manifest and I'm thinking probably Russia, Ukraine on the leasing side there. There's a lot to play out. I'm not sure whether fear is the right description, but there's certainly uncertainty and I think uncertainty usually should at least improve pricing economics. So whilst the general trajectory is negative, exception being obviously US general casualty, but there are I think reasons to see some pockets of stabilization as well, possibly improvement. As opposed to the story of the insurance reset that we've had since 1123 that last couple of years, obviously the price is great. It's been very, very good. And obviously that was also on the benefit of the underlying insurance pricing or improving at the same time. And then insurance pricing improving. But even more importantly, it has been the attachment points really, you really resetting the attachment points to much safer level. Again, is that coming under pressure? Because that would probably be the one thing. So the story of last Monte Carlo, for example, I would say summarizing all of the last one, one, was that reinsurers were happier to trade price than they would the attachment point. They didn't want to go back down there again. Yes. I think the great difficulty. And I look, we sit with clients and brokers, we hear the arguments, the sedents. And I talked before about having to listen to what your sedents need and want to buy. And I am a big believer in that. I think the big challenge in, let's call them working layers, the big change in working layers is you need reliable data. And I'm probably thinking more property cat here. I think the great challenge we've been talking about it for several years now is the increasing frequency and severity of loss. And I just don't think that really the industry knows quite how to deal with that and how to price it. And that makes coming back down in terms of attachment point a challenge. But we should be getting better, shouldn't we? I know that we've got more data. There's some speed data coming out of our ears in terms of, you know, everything's got a sensor attached to it. We've got no, there should be so much more data. Do you think we actually getting our heads around this? Well, I think you touched on an interesting point. And again, we make them onto it later. I think there is more data. The question is, do we have the capability and the tools and the technology to really mind that data? And to understand what that data is really telling us? And I think, you know, the answer is probably not to the degree that is giving us not certainty. You know, insurance isn't about certainty. It's obviously a healthy unknown. But you have to feel you're on the right side of understanding. You have to feel that your price is at least absolutely greater than the burning cost. And you have to have a certain security in that pick. And I think that's proving difficult. And particularly with things like property cat, we judge these trends over decades, not one or two years. So, you know, it's becoming more difficult. Obviously, some insurance, a bit of this, some rinshures, a bit of others. Do you think some are really are getting a handle and when they're coming up with an external, they come up with a real thesis as to why you could get back into them, nearer to the burn near and well working? Yeah, I mean, we'll look at these things, you know, but we're told that others are, and that's great if they are because this is a marketplace and markets need to provide solutions. I think one of the things that separates the more successful from the less successful companies in our businesses, those that can innovate and that can develop products and ideas and solutions. I suppose you'll know when you see it, when you see a submission that is straight ahead of anybody, else is they these people really have thought about this problem, haven't they? That they've looked at the frequency and severity of property losses in their book or wildfires or whatever it was. And they've shown you something very clearly that they've done that they would like you to give them some credit for and then I suppose it's easier to give credit if they can put a beautiful case, I suppose, then it's down to the individual company. Absolutely. I mean, not every single client is priced. We've priced every single piece of business as if we're leading it, although obviously we don't lead everything, but we put that time and effort into every single piece of business. We say this to clients all the time, the better your data granularity, the more that you can give us, we will reflect that in our best view of the price. That's the commitment that we make all the time. And there is a, depending on the line of businesses, often significant differences in quality of submissions between clients, that's sort of inevitable. So we always try and do our best to reflect that, but coming back to the attachment point, it is a challenge. We know clients and seasons would like to have more protection for that earnings volatility piece, we get that, but it's not sustainable and I don't think it's actually helpful to the industry to be offering products that aren't supported by good analytics and where pricing over cycle is going to be sustained. It's not the sort of classic. The broker comes and says, "You have to write with this, otherwise you can't write the rest of it." We've heard that many times. The loss leader. You have to write the old loss leader because that's what the client wants. And then the rest, yeah, you can write the new top layer, though, as well. Exactly. You have to look for these conversations as the nights get longer than the way they get to colder. Well, I think we've established that the market's a little bit softer than it was, more competitive than it was. What about demand-sided things? Obviously, there are two different types of soft market. The worst one is where it's suddenly demand-ful of cliff and so there's nothing coming in and there's no wonder where the next submission's coming from. What's submission flow? Someone like London, where you can measure it more easily. Submission flow isn't our concern, so we're talking on facultative. We've actually been expanding our facultative teams globally. We now have casualty. And something you've been strong in for such a long time. Absolutely. And look, you know, facultative results outperform treat to results year and year out. Well, absent a single large risk loss, but over time your facultative results should, and ours do, as was most of the industry, outperform treat. And that makes sense. You're selecting individual risks. You're pricing individual risks. But traditionally, we're a big casualty factor in states, but not internationally. But we now are offering facultative casualty in London, both professional and GL. We've also expanded back into facultative and continental Europe, but on the property side and higher additional resource here in London. So, big believers in fact, it's always been a very important part. It's a sensible one. But an important part of our portfolio. So, it sounds like the flows are very healthy. London can never become complacent. I think in the past, there's been a little bit of a danger of that. I think a strong law is really important for the London market. I think where London has an edge which it could easily lose, but right now I think it does have a very deep talent pool. It's a ability to offer pretty much, again, sort of every product line, very strong in specialty lines, does continue to draw business. But look, there's just no room for complacency. All hubs now, whether it's Dubai, Singapore, are very well established and London has to fight hard for the right to see the business. And do you think some of the technological advances that things are making submission flow more digital with less friction, less cost attached? You know, there's not a top 10 broker that doesn't have some kind of facilitiesisation plan and obviously the carrier side, there are also plenty of providers out there who want to sort of help facilitate some of the things you're doing. Of course, the things that could be facilitated is the lower value higher volume stuff. You encourage by any of that and as a way of London being able to compete or to be efficient. I think as you've just described facilities as a sort of an administrative efficiency and streamline. I know, but it's fine. But it doesn't conflict with you being able to individually unknow what you're saying. So I think facilities have had a bad name in recent years. Probably not for good reason and not is not. So I think there is a place for the streamlining and process efficiency. I guess my hope as an underwriter by trade and by background who wants to see every single race guy, I guess I question whether the traditional facility will be necessary if we can really harness the full power of AI capability within process in our business. I personally feel a little bit too much of a downside around the facilitation of business or be it, I agree that from a process and an expense efficiency, they could and should have a place. But I think AI will deal with that in the future already. It's quite frankly because you're still able to individually underwrite it almost everything, but you'll be able to do it so productively that you're able to deserve rising 10 risk a day. You could write 100 or 1000 exactly. I mean, I think AI in the initial phase, it's going to be more of a process advantage, but you're limited only really by your own imagination ultimately in how AI will impact on our business. I often have a thought that of course at some point in the future we might not need treaties because the machine, the risk can just go through them so quickly, some will put down a billion dollar line somewhere, but all the different bits that need to be reinsured will be reinsured facultatively, but instantly or that before they put the line down, it could have all been sort of pre-place and pre-packed. And then it just flows and then you won't need to treat it anymore because why would you want to have a minimum deposit premium of things? Yeah, that's a really interesting thought. I hope I'll be tired. Way off in the future, isn't it? I suppose you're doing two forms of automation. The first one with a proportional treaty is you've already pre-automated to say yes, I will suppose we will be 20% of everything you do. Whereas you're going to almost automate everything individually. Yeah, I mean, look, treaty underwriting has always been about underwriting the underwriters. You said you're effectively setting a framework and accepting a basket of risk when you spend your time, obviously, understanding those portfolios and really underwriting the underwriters. Well, let's talk about AI. From what you've just said, it sounds like you're seeing the first useful use cases for AI as being the sort of low hanging fruit, getting rid of the boring stuff. Is that how you found it most useful? Yeah, I mean, we have a dedicated AI team, the very originally named Trade Trans-Re-Ai team, and they are initially focusing on process efficiencies and enhancements and that could be around wording reviews, obviously premium bookings. Ingestive? Yes, exactly. Taking data into systems, I mean, aside from time and cost savings, I think if you can improve the error rate, anything where you manually keying in data, you're clearly going to have a higher rate of human error. So I think our focus and I think a lot of the industry focus is that as a kind of low hanging fruit, probably for me, the next phase would be, and we talked about it earlier when we talked about data and there's more data available, but are we able to mine it and understand it and draw conclusions from it? And I think AI is going to be a game changer to that. Almost like the non-numerical assessment of data and mining. Yes, there's conclusions to be useful and things that will help you, rather conclusions that might not be. Absolutely, but looking for things like, you know, patterns and claims data, as I say, sort of non-numerical dissecting of information. And I mean, all of us are capturing more and more information, but as I say, I was certainly not harnessing the full power of AI yet to mine that data and to understand that data and draw the conclusions. And I think that's, again, the next sort of inevitable direction for that. And do you think we're anywhere near, obviously, at the moment, we're sort of creating an indefatable, underwriting assistant. Will it ever get to the point where we're going to create an indefatable underwriter? For really, how? Really in the lead follow-up market, I guess. See, we've got a large massive follow-under-write on the Android. You do. Exactly. So, you know, you argue that it's partway there. I mean, look, all underwriters will blanch at that notion, but the fact is that the pace of change of technology, large language models, machine learning is so rapid. I think it would be foolish to rule anything out. However, I do think you need to have significant checks and balances around that, certainly initially. And there'll be-- And this face, I mean, you read it over. Highly regulated industry. Highly regulated. Some people are going to come and tell us what we can and what we can't do at some point when they get around to it. Absolutely. I learned to do it, especially in this week, data lineage. Oh, good. And I used chatGPT, actually, to figure out what the definition I'm going to read it, because I couldn't possibly remember it. So, like, provenness. Save your buying an antique to prove that it was, you know, well, it's a bit more than that. Let me read out what it says. Data lineage refers to the process of tracking and visualizing the flow of data from its origin through various transformations and processes until it reaches its final destination. It provides a detailed map of how data moves through an organization's systems, including where it comes from, how it is transformed, where it is stored. And I think this is the crucial bit. This is crucial for ensuring data quality compliance and governance. And I think that's what we have to marry together. Because at some point, they're in a regular sense of why you discriminate against all these people. I don't know why, actually, because that's just what the machine told me to do. Absolutely. So I think the power for change and the pace of change can be extraordinary, but there has to be the checks and balances and compliance with governance around that. You need to have to know why you need to look inside that box and be able to say, I know why we did that. Yes, absolutely. Because otherwise, yeah, I suppose if you can't do that, then you probably, suppose you shouldn't be running an insurance company. Exactly. The governance of the compliance around what we do is significant, but it has led to an increase in the professionalism of the business. There's no doubt about that. So, well, let's talk about casualty, obviously, that I don't really have to do a podcast with, without talking about casualty. It's given that level of expertise and the amount that that class is associated with you. How are you feeling? Obviously, we've been through a classic sort of pricing and reserving cycle over the last four years with some reserve strength, and also a lot of uncertainty. How do you feel? Let's think about business that's been written today that you're ensuring today. So, it's quite interesting. If we sort of wound the clock back five years, we probably thought professional liability and general liability were in a similar place. We knew that the sort of 14 or expected the 14 to probably at the time of 18, now maybe more like 19 and 20 years, were going to be tough, as you said. There was evidence already of significant deterioration, and both lines of business harden significantly. And as you said, this is very much in our DNA, and we lent into that. If you fast forward to now, or even a couple of years ago, the outlook for those two lines of business, professional liability and general GL and umbrella, are so completely different. We haven't seen the reserve deterioration on the professional side. Certainly, the 21 to 23 years are looking exceptional. And that only means one thing in our industry, which is, as I've said already, falling rates. We think they've fallen too far. We think that we'll call this an report. Yes, absolutely. I mean, we write a number of reports. They're all available publicly. Are you sure I'm making a link? Yes, that would be great. Thank you. Shout out to Elise McKenzie and Keith Tric, who are GL and professional product leaders globally. And they put a huge amount of time and effort into those publications. So that's the outlook on professional liability. And then of course, GL has gone completely the other way. I think we've just seen this, well, I don't know if it's unprecedented, but certainly the deterioration of the back years has been worse than anybody thought. And probably more concerning still is the 21, 22 years, which everybody thought at the time at pricing levels at the time, we're going to be maybe as good as the liability is looking. Well, that's certainly not the case. There's some worrying trends already in those years, not expecting the seroton mirror 14 to 19. But as a consequence of that, we are now seeing and we have seen probably for the last three years, also sustained double digit compounded rate improvement. Now, the million dollar question is, is it enough? Have we got the reserving right? I mean, we've seen the press releases from numerous of our peers in recent quarters. So we probably have as much data as anybody on this. And we think the outcomes are going to be very different by client. We are maintaining a portfolio with those that we believe are navigating through keeping the limits compressed, keeping the rate. So it's an amazing thing. I've probably spent most of the teens of this century interrogating the market and asking them, is rate adequate right now? And for most of those teens, people are quite happy. And of course, it's only with hindsight that they weren't. I mean, that's the billion dollar questions, isn't it? If you could bottle up exactly, what could I not kill it myself with during 13 to 18, whenever I was just slowly losing their minds? With hindsight, of course, at the time, it didn't seem so bad. They seemed very benign at the time. I think that's the whole point here, the whole industry. I'm not just talking to random people in the pub. I was talking to smartest people. Absolutely. Absolutely. And the nuclear verdicts, thermonuclear verdicts, we even have that term now. So it's very difficult to be certain, but we do believe that our core partners are keeping rates in the right place. They're keeping limits compressed. They're managing as well they can. I suppose as a player in the market, you have to keep your relevance. You will have suffered just as much as everybody else in those more difficult years, but you have that relevance and you have that commitment to keep going, I suppose, is to look. Yeah. I mean, look, the back years are the back years. We shrunk our book considerably in those years and then grew it frankly from 21 onwards. We think we did the right thing with hindsight. It would appear as if we started to grow too soon, but everybody believed at the time that 21 and 22 were going to look better than we believe they will do now. And other things have been very interesting the last decade has been the growth in M.J.'s distribution channel. And again, a lot of people would say that that's perfectly understandable that talented insurance underwriters want to own more of their own equity in that underwriting skill. And that seems perfectly natural. And of course, a lot of technology is allowing that to happen that they can run effectively sort of virtual insurance companies these days. And of course, they can have the latest tech whereas their old legacy carriers have a lot of legacy tech. That's the thesis that makes a lot of sense. And of course, there's a lot of new interesting specialty innovative classes of business around at the same time. And also when we took back the last 15 years of something like cyber and the M.J.'s have been a natural place to go and do some innovation. But then also one of the other parts of that thesis is that also, of course, re-insurers, long-term re-insurers have had less of that kind of business in the books that they were ensuring from their traditional scenes. As some of that hiving up into global programs happened, you would get less of that sort of stuff you'd be asked to take on more of the tale, unless of that kind of what somebody used to describe as 'ballast business.' There's sort of nice stable things that run at 99 forever type of business. They don't sit the world on fire, but they also don't cause any embarrassment. And also our core part of some of your profits there year after year, is that the right way of describing what's happened? Is it just a secular change, a permanent change in the way things have gone? Because as re-insurers, you lost out on some of that kind of business. And now you're backing a lot of those M.J.'s, some of them through sort of fronting companies, that kind of thing. But do you think that's the right way of describing it? So here's our view. The USMGA space has been very established, very successful in many ways for many years, often characterized by niche businesses with either niche product or niche distribution, which the large, often global, established risk-bearing insurance companies wanted to take a piece off. And this was an efficient and effective way to do that. Some of those insurers parted with re-insurance, and we were able to access some of that business as well. Sometimes not. We have some very long-standing M.G.A. and carrier partnerships in that space, and we'll do in the future. I think what we've seen in recent years is quite different to that. If we think about that original model, there was a lot of underwriting discipline, and there was a lot of operational discipline from effectively the carriers, so the paper providers, the insurance companies. That has shifted. Now, let me say, first of all, that there's always been a few front-in-companies who operated a different model. It was a fee model, but they had an infrastructure and were providing a good service for that fee to re-insurance and to the M.G.A.s. They were providing an operational infrastructure to support those M.G.A.'s, particularly if they were startup M.G.A.'s. And again, no problem with that model. I think what has changed, and I'm not sure it's been driven in our opinion by traditional rated re-insurance carriers. But I think what we have seen in recent years is, how could it an explosion, of M.G.A.'s and front-in-companies with a very different sort of mandate? And any front-in-companies always going to need re-insurance support by definition. They're not taking the bulk of the risk themselves. But I don't think that the more recent front-in-companies are being supported largely. I'm not so clear there'll be exceptions to this. But they're not being largely supported by the same re-insurance panels that were supporting perhaps that first incoheration of the M.G.A. and carrier market. And I think what you've seen is something that shifted from a sort of underwriting focus to a fee generation. And our concern quite candidly is, where is the underwriting focus in that chain? And we think that has been lost a little bit. Now, look, I don't want to sound as if we are anti-innovation or anti-change. I think the insuretex, different model, different market, but the insuretex have come in and frankly held our feet to the fires in industry a little bit and shown us that there are different ways to do things. But at the core of insurance has to be underwriting integrity. And if you lose underwriting integrity from that chain, we don't think it's sustainable. Now, you can't just lose money year after year. Absolutely. Keep growing. This just leaves more. But any insurance company can lose money. That's fine. We've said before in the business of risk, re-insurance in particular, our job is to take volatility away from insurance companies. But over time, and across the cycle, you have to have a profitable business. And if underwriting discipline and integrity and oversight is not at the core of that chain somewhere, and it becomes about fee and about volume, then we don't think it's sustainable. Now, time will tell. Yes, but in the end, they will just run out of steam, aren't they? Because they've burned their capital. Absolutely. I think the point mark is it's not necessarily super long-term capital here. It's not the same as a rated balance. It's not the same as a large insurer with all of that infrastructure and sort of underwriting DNA, providing that paper. So, you know, look, time will tell. We're not against innovation, but innovation in any form in insurance has to have at its core underwriting integrity. So, it's got more competitive. It's attracted an alternative set of investors who are probably more excited. But at the same time, it sounds like you don't think they could all succeed at the same time. It's not for me to predict their outcome. I mean, it's not everyone's succeed. But that's the reality of it. And you know, you see that in any sort of business that evolves, any industry that evolves and particularly often the four on us, there will be casualties of war. And we think there will be in this current incarnation of the MJ market. But that is in no way criticism of that traditional MJ model. As I say, we've been long-term supporters of numerous facilities and we'll continue to be successful. Because when everything works right, everyone's interested in lying. Absolutely. Absolutely. Undressed as a happier than they would be in other situations. And happy people are going to do good jobs, aren't they? And it's distribution. And we all have to be thoughtful around how we access business and have different ways of thinking about it. But at its core, insurance is about underwriting. Successful underwriting to make it sustainable. And if you're at the end of the chain and you're the one losing money, you won't say that for very long. Exactly. But let's have a quick tip about Cyber has been quite interesting. And we've had the advent of an iOS market for cyber. It's kind of cyber cat market, shall we say. You encouraged by that, that's a market I know that you get involved in. It's interesting the cyber market. But I think Hay and Best published some numbers just this week, which showed that the US cyber premium has dropped for the first time ever, I think. So if we think about it as a cyber market maturing, I'm not sure that that is necessarily the case. I mean, I think if you look at the relative limit available versus the potential of exposure and demand for the product, I think there's still a very long way to go. I'm thinking about the recent sort of rasterware. Research that the people are not buying. Exactly. So, you know, I'm thinking, I mean, obviously the US markets, the bigger market, but I'm thinking about a couple of examples recently closer to home here in the UK with the Marx and Spencer and the co-op, ransomware attacks. I think co-op didn't buy at all. And I think Marx and Spencer bought about a hundred million pound or $1,000,000. Well, obviously if you're not buying, you're not covering any of your exposure. And I suspect M&S's losses will be significantly higher. So I think there's still quite a long way to go before we would really consider that that market is maturing. I think maybe the ILS market is maturing a little bit more in the sense of we've seen over the last few years. ILS started out very much as a property cat product, but clearly we've seen investor appetite expand beyond that in recent years and cyber is one of those. And I think that's great. It's a solution in the marketplace, which clearly our seedings are interested in. We're very interested in the space. We have a cyber product leader based in our Zurich office, Tinnacle Isnek, who is very plugged in and doing a lot of research. You know, we support. We have quite a narrow client strategy, but we support the market. But I think there is a little bit of a disconnect between what the insurance companies, the insurance players are wanting and probably needing to buy versus what the conventional traditional rated re-insurance market is offering in a quantity that is enough to make a meaningful difference. So obviously we're all playing in the space, we're all writing, quote, share, axed up loss, whatever it may be. But it doesn't feel as if the volume is there yet to match the potential demand at the insurance and client end. And there's a few reasons for that. I think we're still grappling a little bit with the systemic risk, different views on that, from different players. The sort of war attribution is a tricky topic. I think the take-up rate, as you've mentioned, and I said a couple of examples there. So I think there's a little bit of a way to go, but look, I've thought of cyber as our greatest opportunity and our greatest threat all at the same time for some time. And you have to be in it to learn about it, and we're very committed to learning about it. This is a bit chicken and egg as well as partly because if you went to one of those responders and said, well, look, it's only a sticking plaster. If you could give me a bigger limit, I mean, I don't have to think about if I buy a massive skyscraper, I know I can get it in short, no problem. The property side of it. But yeah, the cyber risk, can you come with something that's actually relevant and then has the industry got the product and the actual capacity available? Yeah. So it sounds like some of the maturity certainly around at least getting those eyeless structures off the ground has come through the investment in modeling. Absolutely. And so we've become more comfortable as an industry that we can define an event to the extent that we can then build a massive tower around that event and that would pretty solid around the foundations of what is in that definition and what is not. Yeah, I mean, look, I think we welcome any and all tools that help us assess risk across all our product lines, but particularly cyber. I think the whole industry recognises that cyber modeling is very much in its infancy. We're still seeing with property cat modeling, which has been established for far longer. We're still grappling with secondary perils and are we getting that piece right? So I think there's a long way to go before the industry is going to feel very content, relying too much on the sort of modeled outcomes, but look, it's back to data and it's back to understanding risk and trying to put a price on risk. And I think the markets are a little bit of a crossroads really in sort of trying to figure that out. As I said, the AM best numbers were quite surprising. I think even just two or three years ago, the projected exposure and premium for the cyber market was on a very upward trajectory and it seems to have flattened out. And as I understand, it haven't read the full report, but I understand it, the exposure's fairly flat and prices come off a little bit. So that exposure flat in cyber surprises me a little bit. I would expect to see that. So I think there's obviously growing pains. I think it's a super interesting product. And as I say, I see it as our greatest opportunity, but at the same time, potentially our greatest threat, if we don't get our assessment of the systemic risk correct. We've been talking about AI. What about AI as a global casualty lead? Oh my lord. The casualty butt stops with you. So what about AI? Obviously, it's just a massive silence exposure at the moment, isn't it? It's not been excluded from anything. It's all in there in liability, generally, professional and empty. So it's there if it's not excluded. So is it causing any concern at the moment? There's a few cases here and there, aren't there? I mean, I think the answer is I don't know that it's the top of everybody's. I mean, I think casualty lines have a lot of other things that are causing the concern. Exactly. Exactly. But look, I mean, I think it would be any casualty underwriter who isn't thinking about it is probably missing a trick and probably a little foolish. I think the question is how will it manifest? And what I mentioned before about the data lineage, I think is going to be very important here. How we control the journey that data goes on and what we do with it and how we use it and where we put it and how we store it, et cetera. This compliance and governance, please. Sounds terribly boring to everybody, me included. But I think that will go a long way to alleviating some of the potential threat. But look, it's the emerging technology. And honestly, I don't think we have all the answers right now. Yes, it sounds like the sort of thing we might have some kind of standard, you know, it would be like ISO 9000, whatever it is. Absolutely. One of those things. So if you're not doing that, then you're not insurable. It's a little bit like data privacy and GDPR. We've learned a lot about that and there's a lot of compliance and regulation around that. And I think it will be an extension of that in some way, shape or form. Excellent. One last thing would be digging that overall, your huge global spread. That you're managing. Where are you most excited about growth? I mean, I think if we look at our portfolio, I think we feel we're probably a little underweight and continental Europe and APAC. The UK, we've been here a long time, we're pretty stab-beats for as long as I can remember as well, though. Yeah, that's true. We have a few competitors in our backyard in the continental Europe that maybe make that market a little bit more challenging. But now I think outside of North America and London, I think we're seen as quite a traditional PNC writer. And that is obviously going to be sort of the core of our business. But I think there's a lot of opportunity to access and more specialty lines. And as I said, particularly in APAC, perhaps products and structures that are not needed and not bought in the more established and more mature markets. But you have to have the talent on board to access that business, the brokers, the distribution clients. So we've been investing in that. We've been building out our team in continental Europe. We've been adding a little bit also in APAC. So I think that's probably where we will see a creative opportunity. Look, the market is not in a terrible place at all, but the trajectory is in one direction, absent major losses over the next 12 months. So it's really about trying to look for some areas which are perhaps a little less competitively strange. You know, one of the great advantages I've said it before for Transriers that we do have capability to write pretty much any non-life line somewhere in our group. We have that expertise. So it's our job to get it to our teams in the regions and to support their efforts in building out their books. They know this business, they know their clients and they know the markets, you know, better than we do centrally. So that's going to be quite a lot of our focus, I think, in the next sort of 24 months. We'll be looking forward to seeing the progress. Thank you very much. Louise, thanks so much for your time. It's been really, really refreshing talking to you. You're such a direct. No, really direct. I really enjoyed that. It's really refreshing. So thanks so much and in real book of time, sometime in the future to check in on how things have been going. That would be great. Always happy to chat. Thanks very much. Thank you. Well, I hope you enjoyed today's episode. If you did, don't forget to subscribe or leave a like or a review or recommendation on whatever podcast platform you used to access this program. These really help get the word out. Before we go, just a quick reminder that advertising slots are available here and in other places in the Voice of Insurance podcasts. Podcasting is the fastest-growing medium and attracts a high quality audience of key decision makers. It's also an intimate medium where you, the listener, are right in the room with me and the interview subjects. Needless to say, that means it's a great way of getting your message out directly to an audience because you know you've got their full attention. It's also very cost effective. So get in touch with Mark at the Voice of Insurance.com to find out how you could be speaking directly to the industry. The Voice of Insurance has produced an association with Advantage Go. Release your underwriters to underwrite with Advantage Go's underwriting platform. Voice of Insurance is produced by me, Mark Gagan. Music was written by Anna Gagan and produced by Carlos Gagan. Check out more podcasts and written comment pieces at www.thevoysofinsurance.com.