Staying Ahead of the Curve in the P&C CAT Space

As investment in technology has helped many insurers improve their analytics and their bottom line, what has Orchid Insurance been doing to stay relevant in the P&C CAT space?

The use of big data is a reality of insurance, whether you are on the carrier side or the MGA/MGU on the distribution value chain. Organizations that invest in technology will drive a more defined and nuanced view of risk, have a better handle on the risk portfolio, an easier and automated platform to transact to customer base, and efficient scalability of the business to provide value add to carriers and distribution partners. Orchid is no exception. We made a significant investment over the past several years on a new online quoting platform that also allows us to incorporate several thirdparty data components seamlessly during the process.

With the last several years of greater-thanaverage CAT losses throughout the industry and increasing reinsurance costs, what is Orchid doing to stay ahead of the curve from an underwriting perspective? How dependent is the organization on the use of technology and third-party data to underwrite and price individual risks?

The integration and use of third-party data allow us to deliver a better experience for our agency partners, as well a new way to efficiently identify risks that might better fit carriers’ underwriting appetite. It helps us drive portfolio optimization so that we do not have to constantly rewrite our programs and also adequately price business when initially underwritten. We are always exploring new sources of data as a way to improve our understanding of our platform.

As traditional capacity providers have moved a bit to the sidelines in the past few years due to losses, what has Orchid done differently to continue to provide capacity when others have not been so fortunate?

This has become a bit of a reality for all organizations operating in the CAT-property space. We have attempted to stay focused on underwriting discipline that is designed to produce profitable results including strict adherence to technical pricing adequacy and portfolio optimization. In addition to attracting new traditional program capacity, we have also created our captive reinsurance cell through a fronting carrier as a mechanism to assist on the overflow of existing core business opportunities, incubation of product segments, and the diversity of overall business. Additionally, Orchid is partnering on a new carrier start up that is domiciled in Florida that is well positioned in a geography segment that is currently in distress.

With the use of ILS capacity increasing over time, do you see this as a fundamental market shift, or will the balance of power remain with the London market?

There is an overall need for E&S conduit capacity in the marketplace. I am starting to see a healthy injection of new capital, new fronting carriers and a recapitalization of existing carriers. This will take up to another 12 months to ease the existing constraints in the market which will continue to result in shortage of supply and higher rates.

Have the expectations of capacity providers on their MGA partners (both existing and potential) changed significantly in the past few years as the frequency and severity of CAT events have increased?

The short answer is yes! As the levels of sophistication and reliance on data and analytics on the carrier side have increased, the expectations of MGA partners have also increased accordingly. Carriers expect their partners to be able to look at risk differently and price it differently than they did a few years ago. With access to sophisticated risk modeling and many other technologies that allow for MGAs to get a much more complete view of risk, both at an individual level and at a portfolio. The bar has been raised, and the expectations on MGAs will only become greater in time.

With the flexibility of both rate and form in the E&S market, do you think that more traditional admitted providers will begin to enter or expand their E&S options?

While the admitted market continues to capture the majority or risks, there has been solid and steady growth in the non-admitted (E&S) segment, for a few reasons. First, E&S providers can adapt more quickly than their admitted counterparts to the changing needs of the market, both in terms of rating flexibility, but also in terms of forms. We have seen traditionally admitted carriers entering the E&S market in the past few years to gain additional flexibility and also as a way to diversify their books of business.

Where do you see the biggest opportunities for Orchid in the next five years?

I see all these market fluctuations and demands in technology as opportunities. We are actively engaged in expanding our product and distribution verticals, with our recent announcement of the formation of CrossCover Insurance Services, which is a wholesale-to-wholesale commercial property venture. We have worked hard to expand our suite of products across a larger geographic area and are now licensed in all 50 states, as well as to write business in the Caribbean. As far as acquisitions, I believe we will continue to look at and evaluate midsize opportunities that make sense where the business has a record of profitability, proficiency in data, and a diverse distribution model.