Tailor Made

Horseracing, long the “sport of kings,” has also become the sport of sheiks and other wealthy families in the oil-rich Middle East.

The stately Arabian stallions, which are the most popular in the world for endurance and show events, also trace their ancestry to the region’s ancient Bedouin desert tribes.

Until recently, insuring the highly prized thoroughbred racehorses, along with Middle Eastern Arabian riding and show horses, while they were shipped around the globe was made more difficult due to Islamic religious law, known as shariah. Shariah governs not only religious rituals but all aspects of day-to-day life, including, among other things, bans on interest and pure monetary speculation and a prohibition on investing in industries such as alcohol and gambling.

That’s the sort of challenge XL Catlin relishes. Working with Cobalt Underwriting, a shariah-compliant managing general agency, the insurer earlier this year launched the first-ever shariah-compliant equine product. Available through Lloyd’s, the product covers shipment and travel-related logistics as well as mortality, theft, infertility and permanent disability.

The shariah-compliant equine product is an example of XL Catlin’s determination to be a global leader in specialty insurance, recognizing that in a rapidly changing world plain-vanilla products don’t work for larger, more complex risks.

“Our clients’ risks are evolving rapidly, and we should expect that. That’s the world we live in,” XL Catlin CEO Mike McGavick says. “If we’re going to have an organization matching this rate of change—and do so in an industry that is very poor at innovation—we’re going to have to be deeply in the specialty spaces because that’s where solutions tend to emerge first.”

Custom Made

“Where specialty lines have done well is with customers who recognize that we can customize our approach to every single client,” adds Kelly Lyles, who is head of insurance regions and in charge of maintaining broker and client relations. “Specialty lines have historically and continually focused on what it is the client needs and what we can build around those needs rather than just what kind of generic product we have for you.”

Another recent example of a groundbreaking specialty product offered by the company is an insurance solution designed to cover specific risks faced by the global mining industry. The new offering, also available through Lloyd’s, covers all mobile assets, as well as machinery and equipment either above ground, underground or beneath the sea, any natural mineral including precious metals and stones, and all employees.

“The mining industry has special exposures of its own that require specialized products that other companies do not need,” explains Neil Robertson, chief executive of Specialty Insurance at XL Catlin. “We were able to pull all those products unique to the mining industry together in London, so now only in London can you get every single one of the products for the mining industry and be covered regardless of scale, proximity and volume of risk all over the world.

“Clients can buy the global program policy to cover any number of mines, any type of mining at any phase of operation—exploration, development and full production. Essentially this is a one-stop shop for mining industry clients. We think it’s a real game changer.”

Further cementing its commitment to specialty lines, XL Catlin in August acquired Allied International Holdings, the holding company of Allied Specialty Insurance, and T.H.E. Insurance Company, a leading insurer of the outdoor entertainment industry in the United States. The company provides general liability, workers comp, inland marine, auto liability and some property insurance for carnivals, amusement parks, fairs and festivals, hot air balloons, fireworks, concessionaires, family entertainment centers and waterparks.

“The acquisition of a leader in a niche specialty risk business with deep, long-standing client relationships and strong customer loyalty is perfectly aligned with the complex underwriting expertise of XL Catlin,” McGavick said at the time of the acquisition.

Critical to the company’s success in specialty lines is its affiliation with Lloyd’s of London.  Both XL Group and Catlin had been syndicates of Lloyd’s since their inception, and when their merger was completed earlier this year, the combined company became Lloyd’s largest syndicate, writing an estimated 10% of Lloyd’s business.

Jennifer Schipf, head of specialty distribution and network/Americas and head of fine art and specie/Americas, says the companies’ legacy businesses complemented one another and the merger has created the ability to “cross-pollinate and offer coverage at greater line sizes or additional capacity.”

“While there was some overlap of brokers coming to XL and Catlin, some only went to one or the other,” Schipf says. “XL was more retail focused, and Catlin more wholesale oriented, and now that market is available to both.

There is a greater opportunity across both distribution networks, and in some cases we can take more of the risk.”

“We have been focusing on specialized-needs business for each of our legacy careers as companies, and our relationships are quite strong,” Schipf adds. “The Lloyd’s market is more person-to-person, face-to-face, as opposed to the U.S., where business is done by e-mails and telephone calls. The beauty of Lloyd’s is that the entire market, reinsurance or direct, is all in London in one place. It is a personal relations business built up over many years, and our team has those personal relationships.”

The United States is the largest market for specialty insurance in the world, and Robertson says American customers will particularly benefit from the large presence of XL Catlin at Lloyd’s, where numerous specialty lines are offered.

“The volume seen in Lloyd’s is much greater than in the states,” Robertson says. “If we have a client in the U.S. that has a risk we can write, we will do it, but if it is a big enough risk, we may need to go to Lloyd’s to get multiple participants to share that exposure. We have a large number of underwriters who have worked in Lloyd’s for their entire career. They have seen a large volume of these difficult risks, and they have a number of brokers that they have worked with over the years, so they know the business well.”

For example, Schipf says, a $1 billion fine arts policy for either a museum or a wealthy private collector would be “a very viable alternative for Lloyd’s placement.” Specialty coverage might come into play for that exposure due to a variety of risks that could endanger the entire collection, as opposed to, for example, the theft of one object or a tear in a single painting. For example, a private collector might have homes in New York, Florida and California, meaning in addition to the normal coverage for fire, theft and damage in transit, the collection could be damaged by catastrophic winds, floods and storm surges or hurricanes.

“In that case, we might offer a unique disaster deductible that is distinct from all-peril coverage,” Schipf says. “Wind, flood and earthquake could be dealt with together in a systematic approach to augment other perils,” and the total dollar volume at risk of catastrophic loss would be so great as to move the coverage to the London market.

Another benefit of XL Catlin’s presence at Lloyd’s for both American and global customers is the market’s ability to recognize a new risk and respond to it quickly.

“Lloyd’s has always been the greatest center for insurance, with a more entrepreneurial spirit and more responsiveness to changing conditions, so most risks on some level go into Lloyd’s, especially for new products,” Lyles explains. “A good example is the 9/11 terrorism coverage.  There was none of that before 9/11 in New York, and immediately Lloyd’s came together in the marketplace to offer terrorism coverage. That was a product born out of crisis, and the rapid responsiveness of Lloyd’s is why terrorism products came into being.”

Through Lloyd’s, XL Catlin also has been able to develop a wide-ranging specialty line for kidnap, ransom and extortion coverage.

“We hired some very specialized experts in the field to build this product, and we worked with underwriters in Singapore and the United States, in addition to the London team, to develop this product,” Schipf says. “We can now offer a greater breadth of product than most of our U.S. competitors. Some competitors offer only some of the things we offer but not all, or some offer certain coverages but only if asked to. But our standard policy form includes the broadest possible coverage across a number of different perils.”

According to Lyles, specialty lines will become even more important for XL Catlin in the future, especially with the additional capacity afforded by its presence in the Lloyd’s of London market.

“We think of specialty coverage today as involving more esoteric risks, such as kidnap and ransom or yacht coverage and the like. But with increasing capacity in the market, every type of coverage can be more tailored to client needs. Looking at the type of industry, the scale, the number of employees and responding with specialization and customization will be the most valuable service we can provide to clients,” she says.