business as well. We see great potential internationally, but we also realise that we must do things in our own time and only roll out products when we have the expertise and we are ready.”
Yet despite this quest for submissions and gradual roll-out of new business
lines in new geographical locations, Kelley is adamant that the firm actually remains very focused. In fact, he believes this focus is what sets it apart.
“We focus only on specialty property/casualty insurance business and
that is what sets us apart,” he says. “We only serve the insurance market and, in that sense, we are unique in our peer group.”
He says that the company’s goal is not to be the biggest—that mentality
in the industry is dead, he says. Instead, it is to acquire the greatest expertise in its fields and, on the back of this, lead the way in terms of its ability to influence others.
“We want to lead and influence within the industry,” he explains. “It is
not about having the biggest market share, it is about being highly focused and respected, and being able to influence others. Size does not matter any more in that sense in the industry. Our goal is to take products that we think are good and export them to wherever we can work—but on our terms.”
Kelley believes that the biggest immediate challenge facing the business
is the fact that many risks are underpriced. He notes that many insurers have posted solid results only because they have released prior year loss reserves. “But they can’t do that forever,” he says. “The biggest challenge we face is getting the market to respond to the risk within it.
“If you look at any measure of risk premium, the price based on geo-
political factors is up in every industry except ours. As an industry, we look in the rear view too much, whereas we should be looking forward. So many risks in the world are underpriced as a result. We must anticipate and adapt accordingly.”
He says recent catastrophe events around the world have triggered a
hardening of the market on the property side. “We have been able to achieve pretty good rate increases, especially for business affected by Asia catastrophe business. The reinsurance market has tightened too and that will have a knock-on effect.
“This cost pressure will hit margins and force further change. Rates are probably the major concern in renewals negotiations now. But the
32 | INTELLIGENT INSURER | Summer 2011
hardening is limited to property—it has not spilled into other lines yet.” Despite making some early acquisitions—such as Lloyd’s Pembroke
Syndicate 4000 from Chaucer for $25 million, and Marine Re, which added North American reinsurance to its Lloyd’s syndicate’s offering—Kelley maintains that organic growth remains his focus. He also says the company has the resources to do this without the need for further capital.
In addition to its initial $1 billion capitalisation when it was formed, it
raised a further $300 million in 2009 to support its continued expansion through an agreement with funds managed by GTCR Golder Rauner, a leading private equity investment firm and, in 2010, another $250 million through its first debt issuance, which was oversubscribed despite turbulence in the capital markets as a result.
“We are proud of what we achieved in raising capital in both these
instances,” says Kelley. “There is no need for us to consider anything else such as an initial public offering at the moment. If we needed the capital and the market conditions were right, we would consider it, but nothing like that is on the horizon for the short to medium term.” This also applies to future acquisitions.
Kelley’s says that he wants to keep the business focused as it aims for the
leadership position he seeks in the industry, while ensuring strong organic growth continues through a continuous roll out of its product lines.
“We are pretty happy to stay doing exactly what we are doing now,”
he says. “We may get into one or two more lines of business, but our main focus is achieving a depth to what we do geographically. Even in the US, we have a lot of growth still to do as we roll out our product portfolio. We need to ensure that we are seeing the business and taking opportunities.
“We are geared up to cope with that growth. Our management capacity here is very high—we are all used to running much bigger businesses, and there is not a complacent bone in our bodies. The most important thing in this business is often resilience. We need to adapt quickly to things and always stay on our toes. That is the world now. We must always be prepared and be able to take opportunities when adversity hits!”
©
iStockphoto.com / Gannet77
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