This week´s guest on The Voice of Insurance podcast is John Cavanagh, Chairman of Lloyd´s incubator, underwriter, and investor Beat Capital Partners. Incorporated in May 2017 as a long-duration venture capital investor exclusively focused on the insurance industry, Beat has invested in 8 start-up businesses since its inception, with combined planned gross premiums in excess of US$500 million for 2021.
With a career spanning 45 years, culminating as CEO of Willis Re, John now leads Beat, which creates a space where entrepreneurs have opportunities and the support to innovate and reinvigorate the insurance market and why underwriting profitability is the key.
Kicking off the discussion, Mark asks John to brief listeners on why Beat was established. Rewinding to the very beginning, John says, “My founding partner Tom Milligan and I felt that there was a gap in the market for a vehicle that enabled entrepreneurs to start businesses, and as we all know, the London Market was the hotbed for entrepreneurialism.”
Speaking of the market´s capital structure, John discusses how the insurance landscape has changed considerably in the last 25 years, which has made it difficult for start-ups to focus on one class because the multi-class structure lends itself to the capital model as it stands, commenting on this John says, “We felt there were a number of constraints and hurdles around starting a new business, and we felt that if we can overcome some of those and put together a framework that offered everything an entrepreneur needs to start a business, that will be a very worthy thing to do.” John explains how they set up the business to try and build a plug-and-play platform for entrepreneurs whereby they set up individuals and teams with their own limited company and give them equity in the business at the very outset. John points out that the focus is on attracting the best talent with the best deal and encouraging a perpetual view of the business.
As the conversation continues about the type of company Beat is, Mark asks if John considers Beat as an incubator or investor, John responds, “Yeah, we´re an incubator, but I think there are nuances around the incubation model. We are technically a service business, but it’s a service business with a focus on underwriting… what we are particularly focused on is the ability for these teams to make money.”
John talks about the syndicate business and agency business at Beat and the one thing in common, “Although they´re separate businesses, they’re separately regulated within our business, though they are synonymous with one thing and that´s underwriting profit, and that´s what we strive to do with our business, so although we are a service capability and an incubator and a turnkey operator, call it what you will, it´s all about underwriting profit, and that´s really the key to our model.”
Discussing growth plans for 2022, John mentions how they have opened up in the US, which will enhance growth, and the company´s pipeline, “We have a very exciting pipeline which is getting more exciting by as we now start to network North America. We see that as very fertile turf for us and our model, and we think our model will resonate there reasonably well. It´s a lot more competitive in the US because the MGA model is much more established than in the UK, but you know, we think we got enough twists in our model to make it very appealing.”
Mark asks about the company´s philosophy and if it looks for people in high growth classes or just those with a good underwriting track record, John explains, “It´s the personal, we´re class agnostic really… but what we´re really interested in is the talent, so what we want to see is somebody that has a track record of underwriting profitability, that has the ability to maintain cross cyclical underwriting profitability, that has the culture that fits with us and that´s really important, because as you know underwriting talent varies and attitudes around risk vary, what we want to see are people that have a moral based view of risk and a very technical view of pricing, have a complete understanding of their aggregation, understand their systemic exposure and are committed to upgrading that technology as risk changes, and that´s what we´re looking for.”
Enjoy the podcast.
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