Building on a strong base

Building on a strong base

With its acquisition by Canadian insurance conglomerate Fairfax Financial having completed in August of 2017, Allied World is now building on the geographical expansion and growth the business has undertaken over the last six years.

Fairfax’s acquisition of Allied World brought another insurance business into the Canadian company’s portfolio, joining Northbridge Financial, Odyssey Re, Crum & Forster, Zenith National and Brit.

From the outside, it may have been expected that being acquired would have brought about considerable upheaval, but as Lou Iglesias, CEO, Global Insurance, commented, there was in fact minimal disruption.

“There’s a big difference between an acquisition and a merger,” Iglesias said.

“What happed with us was an acquisition. Fairfax acquires companies and allows them to operate independently as part of the Fairfax family. The transaction put us in a position where we are no longer part of the distracting M&A discussions in our industry. We have become part of a family with a much bigger balance sheet and we’re able to continue our mission and building our company,”

Post-acquisition, the insurer has adjusted its operating segments. Previously, the insurance business was split into two distinct segments – North America and Global Markets and they have now been brought together under the heading of Global Insurance. That sits alongside Allied World’s Global Reinsurance arm which is led by John Bender.

“Our whole company is now in those two segments, so it’s much more streamlined,” said Iglesias, adding: “We’ve always been a flat organisation and we wanted to maintain that type of culture. Part of our strategy is to write global policies and programs for our global clients. It was a little harder to execute that strategy when we were separate, so bringing the group together does make that a lot easier.”

With this new streamlined Global Insurance division in place, Iglesias said Allied World will now focus on reaping the rewards from its expansion plan of the last six years.

“We’ve hired a lot of teams in the last six years in a good growth phase, and we’re still looking for opportunities and available talent in the marketplace. But our newer divisions are still growing and now contributing profit to the company,” Iglesias said. “We made a decision about a year and a half ago to focus our resources on these new divisions so they’re all accretive in a material way.”

In 2015, it picked up RSA’s Asian business for $215m, while it has also added several new divisions across its operations in North America and built out its regional offices.

“Our plan is to locate the cities we want to be in, open a branch office there and then over time put additional underwriting resources into those offices,” said Iglesias.

“We’re growing in specialty products we have expertise in, but we’re also expanding geographically. For example, our Chicago office does $250m of premium, but our much newer Dallas office only does $80m. We’re continuing to put new products in that office to help keep it growing.”

With such intense competition in the market, it is more important than ever to meet clients’ needs. A core aspect of that involves responding to some of the challenges facing clients and ensuring insurers are providing the protection they need.

In light of that, Iglesias pointed to two of the key areas that Allied World believes the insurer’s clients need support in and where it can grow in: construction and cyber.

On the construction front, Iglesias pointed to Washington’s mooted infrastructure bill as one that would provide considerable opportunity to the insurance industry generally, and Allied World in particular. But even if the infrastructure bill does not get the green light, Iglesias said Allied World is already well positioned to support the considerable construction work underway within the US.

“Construction spending has been outspending GDP by five to six points consistently year in and year out,” said Iglesias, adding: “Construction is an area we have invested heavily in and some of the areas I mentioned are in that construction space. We’ve got a primary construction division, excess construction, environmental, contractors’ pollution liability, architects and engineers and there’s a surety division, so we’re well positioned for the construction industry.”

Another class of business where Iglesias spies opportunities is in the cyber segment.

As he explained, Allied World has been growing in the cyber sector in recent years and has developed some specialist expertise in the class. However, while Allied World is writing cyber coverage, providing financial protection to cover the cost of losses is just one aspect of the product the company is offering.

“Our industry shouldn’t just be providing cyber insurance policies because I don’t think that’s where we can add the best value for our customers. The most important thing for our customers is “what are my exposures, how do I avoid a loss, and what do I do if one occurs?””

In Iglesias’ eyes, the core elements of Allied World’s cyber product are centered on loss mitigation and risk management.

“We launched an operation called FrameWrxSM which is our cyber consulting and risk management arm,” said Iglesias, adding: “We provide this risk service to our clients --where we’ll go in and identify the exposures, the risk mitigation programme and then develop a post-loss mitigation programme. We’ll also provide that client with an insurance policy, but what the client needs and what we’re providing is actually greater than an insurance policy.”

Underwriting discipline and expense management are constant throughout the Allied World strategy and go hand-in-hand with its global expansion. The Fairfax acquisition well positions Allied World to push on and further cement its position in the industry.

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