Portfolio solutions is getting big enough to matter

Portfolio solutions used to sound like a niche London Market curiosity. A broker facility here, a consortium there, a few specialist teams doing high volumes quietly in the background.

That description no longer fits.

As Mark Geoghegan puts it at the top of this episode, “billions of dollars of premium are now being transacted this way” as brokers facilitise more of their placements and underwriting pools proliferate.

To understand what that looks like in practice, he speaks to Tessa Wardle, Director of Portfolio Solutions at QBE. Wardle runs QBE Portfolio Solutions (QPS), and she is unusually clear about two things: why this model is scaling, and what you have to do to stop it drifting when the cycle turns.

A career built across both sides of the deal

Wardle’s route into this part of the market matters because she has done the broking and the underwriting.

She studied maths, did a placement year as an actuarial assistant at Aon, then took an underwriting assistant role at Chubb in political risk and trade credit. After travelling, she targeted the London Market and joined Marsh as an energy broker, working large global clients across upstream, downstream and construction.

She then joined QBE to run its energy liability portfolio, did that for seven years, and moved into portfolio solutions about three and a half years ago. Put simply, she understands how brokers build flow, and how underwriters stay in control once the flow gets big.

From follow market to building a strategic arm

QBE’s entry into portfolio solutions was not born out of a grand strategic reveal. Wardle describes it as “quite organic”.

QBE wrote its first cross-class broker facility in 2016, initially as a follow market. It had “quite a few challenges in the early years” and then, in 2020, QBE took over the leadership, made changes, and worked closely with the broker to improve performance.

That was the moment, Wardle says, when they “saw the opportunity and the potential for this type of underwriting.”

Today, QPS is a team of 16 and growing. “We continue to grow,” she says, and they are recruiting again this year. The portfolio itself is split into “two main portfolios”, broker facilities and MGA consortia.

Two models, two different jobs

Wardle explains the split in a way that will make sense to anyone who has actually had to manage these structures.

Broker facilities are about taking a slice of a broker’s wider book. “You’re looking to track the broker’s portfolio, their whole portfolio,” she says. “It’s large, it’s diverse, it’s broad… you’re looking to gain a small share of their book.”

Consortia is used differently. Wardle says they use it “as a tool to balance out our broker facility side of the business”, backing market leaders in particular niches. Those leaders can write risks 100%, and QBE can take a smaller share.

That matters because “broker facilities don’t work so well for risks that are placed 100%,” she says. “In fact, they’re completely out of scope.”

This is an important point. “Portfolio solutions” is not one product. It is a set of underwriting arrangements designed to solve different placement problems.

The word that matters: indexation

If there is one technical concept that keeps coming up, it is indexation. Wardle defines it without dressing it up.

“Indexation is basically the same as anti-selection or how you remove anti-selection. It’s how well you’re indexing a portfolio.”

Here’s what she means, in normal market language. Facilities used to get a bad name because some of them became a convenient place to hide problems. Not because everyone was acting in bad faith, but because when placements get hard, bad behaviours creep in. If a risk is awkward, the temptation is to steer it towards the most “automatic” capital.

Indexation is the measure that tells you whether that is happening.

Mark pushes the investing analogy to make it clearer: is this like a fund manager trying to outsmart the market, or is it closer to tracking a benchmark?

Wardle is clear: “It’s more comparable to a tracker.”

They do set parameters and they do shape the portfolio, but the central discipline is making sure the slice they get looks like the book they are meant to be supporting. And then proving that with data, not with hope.

Scale is a requirement, not a nice-to-have

Wardle also makes a point that often gets missed when people talk about facilitising ever more classes.

“I think there is something in that you need scale for a portfolio to work,” she says.

A portfolio works because it can balance volatility. You can bring in smaller classes of business, but they need to be stabilised by larger ones. Some classes are harder to facilitise cleanly, either because indexation is harder to control, or because aggregation management is tricky.

She uses credit as an example of something that can be done, but “you need a few more controls” and it “may or may not suit that facility”.

Again, she keeps it practical. This is not magic. It is portfolio construction, and some mixes behave better than others.

How big can this get?

Mark asks the question everyone asks eventually: how much of the market could move this way?

Wardle references the LMA enhanced underwriting report and an estimate that in 10 years the potential for this market could be around $60bn for Lloyd’s, based on a market of $127bn. That implies something close to half of the market could be transacted via enhanced underwriting.

Does 50% become unstable? Wardle does not pretend there is a neat answer. She says there is an “equilibrium” between having enough leaders to keep the market competitive and having enough fast-follow capacity to make the model efficient. The right balance varies by class and by client size.

When she asks brokers what they think is optimal, she gets the range. “There’s really no consensus.”

That is probably the honest truth. The market will find the limit by living through different conditions.

The soft-market problem, in one sentence

The most useful moment in the episode comes when Wardle talks about what happens when the market softens.

“If you don’t have your facility, during a hard market because you burnt it during a soft market. That’s not particularly great,” she says.

That is the reason these structures are being treated more seriously now. A broker facility is not only about speed and efficiency today. It is about reliable capacity when you actually need it.

Wardle says the difference this time is the focus on monitoring and active management. “We’re always looking at the metrics, looking at what’s going to portfolio, looking at what the market’s doing. And there are adjustments we can make.”

The other part is alignment. QBE wants partners who view these facilities as something you manage through a cycle, not something you exploit in one phase of it. Wardle says they “always want to work with partners who see this as a long-term solution” and want it to be viable “throughout cycles.”

AI helps with the grind, not the judgement

On AI, Wardle is enthusiastic, but her focus is not hype. It is the foundational work that has to happen before any “insight” exists.

“For us, we have vast amounts of unstructured data. We have to stitch lots of data together. We have to cleanse it, enrich it,” she says. “There’s a whole lot of work just to get to a foundational level… so we can provide some good insights.”

AI, in her view, will increasingly support that groundwork, speeding up data preparation and improving what underwriters can see.

But she draws a clear line on autonomy. “I don’t think we’ll ever remove the human in terms of underwriting and many of our processes,” she says. The job is still built on relationships, governance, and judgement. Technology is there to give people better tools, not to replace them.

What this episode really shows

Portfolio solutions underwriting is not “press a button and go for coffee”. It is high-volume underwriting that lives or dies on controls: indexation, aggregation oversight, constant dialogue with brokers and coverholders, and the discipline to keep facilities healthy when competition returns.

If this model keeps expanding, it will not be because it is fashionable. It will be because it is efficient and because teams like QPS can show they are keeping the machine on the rails.