This time on Making Risk Flow, host Juan de Castro is joined by Clive Buesnel, Managing Partner, International at Insurance Advisory Partners. Clive is a seasoned insurance industry expert, having held prestigious roles at Deloitte, Jubilee General Insurance Company and Tysers. Clive shares his extensive experience and deep knowledge of the insurance industry, discussing topics such as data, technology, and the future of the industry.Together, Juan and Clive talk through how data and technology are providing opportunities for carriers to capture efficiency, the exciting development of a secondary insurance market for specialty risks, and what major trends are on the horizon for the insurance industry.
Listen to the full episode here
Juan de Castro: Welcome to another episode of Making Risk Flow. Today, I'm joined by Clive Buesnel, Managing Partner at Insurance Advisory Partners. He's got a brilliant and very broad experience in the industry, you've been Chief Executive of brokers, insurers, advisory firms. So I'm really looking forward to this discussion.
Clive Buesnel: It's great to be here. Thanks for inviting me.
Juan de Castro: Fantastic. Let's start with an overview of your background for those who don't know you.
Clive Buesnel: Yeah, so I started my career at Anderson's in 1990. My first significant foray into insurance was in ‘99, I was one of the original founders of Xchanging. There were eight of us and with some 50 million capital from General Atlantic partners, we founded Xchanging, and we went then in 2001, launched a very major contract with Lloyd’s, and we grew the business from eight people to 8,000 people through an IPO in that 10-year period. But that was really when I got to know the insurance industry, and got to love the insurance industry, in fact, because I was right at the heart of that in Lloyd's, doing outsourcing, technology, et cetera, for all of the markets. And then post Xchanging I was then CEO of a carrier in Lloyd's called Jubilee, quite quickly sold on to Pat Ryan, and then I joined Deloitte into the insurance practice where I ran the London market practice and then more laterally ran all with insurance for Deloitte. And that was, again, fantastic, great clients, really great examples of doing big transformation programs for insurance companies, carriers, and brokers. And then I left Deloitte to go and become the CEO of Tysers, which is the oldest broker in Lloyd’s. I ran that business for nearly three years and transitioned from private equity ownership to then selling to AUB Group in Australia, the second largest broker in Australia. And then, as you say, a few months ago, I joined Insurance Advisory Partners in investment banking. And again, really focused on the insurance industry, which I love, and very much all the pipe people there are really insurance experts through and through.
Juan de Castro: So at some point, you’ve pretty much done every role in insurance. I think you probably have not been an actuary, but I think that's the only one you've missed in your career. And that is one of the reasons I wanted to do this episode together is you've got a very strong experience from a business perspective, but also from a technology and data perspective. And I think I'm sure we'll get into the details of that, thinking about how technology and data evolve the industry. So, let's start with where is the industry today from a technology and data perspective. What are the major areas of opportunity?
Clive Buesnel: Well, certainly, I don't think people go to the insurance industry for great examples of data and digitisation. Having said that, I think they will in five years' time. So this is a really great opportunity. It's a really interesting industry, as we know, but not great examples today. Let me just digress slightly, I have this vision of how insurance will transition. Ten years ago, if you had a car, you had to renew your tax in a car, and you'd have to get all this paperwork. You'd have to get your registration certificate, your MOT certificate, and your insurance. You'd have to get all these papers together, and then you'd have to wander down to the post office, stand in a queue. And then you'd get to the front of the queue, and you'd find, actually, you hadn't got the right paperwork, so off you had to go again, get the rest of the paperwork. And then finally, you've got everything right, they’d write out manually a little tax disc or a piece of paper that had perforated edges. And you had to go home and take this piece of paper and tear it off, and by tearing off the perforated edge, you typically tore it in half as well, and then you had to put it physically in the windscreen of the car. That was how to get the disc. And, of course, the police then had to sort of go around and physically look at people's tax discs and see whether the cars were insured. Now, that is a completely digitised process. There's no longer paperwork. You know whether you're insured. You know whether you've got an MOT. You know whether the car has got all the valid stuff online. And you just go online, put your credit card in, and you renew your tax. And, of course, then the police have a view of every car, whether it's taxed or not. To me, that's a complete digital transformation, from a paper-heavy, clunky process to a completely digital process where it's just an entry in a database that defines whether you're taxed or not. And I think insurance is still at the paper end of that journey, and I'm excited by where that complete transformation will take us. And data is at the heart of that for me. But data in itself is not that interesting. For me, it's what data allows you to do, what data enables you to do that gets really interesting. And that's where I'm very passionate. And in terms of what you can do with data and how it can genuinely transform an industry over time.
Juan de Castro: So perhaps we can use that analogy to think about what are the steps the insurance industry needs to go through. And based on the example you just described, the first thing is how do you start by digitising the process up front and capturing that data up front, right?
Clive Buesnel: Absolutely. I think it's still too much effort, and rightly so, to try and get some efficiency. It's this whole sort of how do I sort of automate a broken process if you like? I'm much more interested in how you start up front with reliable, timely, and quite frankly, irrefutable data that everyone agrees is correct, and that data then flows through the whole process and is the primary data. Now, we've seen examples of this, the work that Lloyd is doing, for example, of Blueprint 2 is very much about how you get a core data record that you can define upfront and can be used throughout the transaction and to create the transaction in a timely way. But again, that's core data. I mean, I think there are two elements for me. One is the core data that you can use to drive a transaction in a very timely way. And there's all the other data. And for me, the core record should be standardised. And this, again, comes from another example where I was in a meeting actually in Monte Carlo with some very senior insurance people around. They said we should use the example of Mastercard which has enormous amounts of data on clients and shopping habits and when people buy things, et cetera. But in order to transact, they have a very defined core record that every merchant can use. And they understand it's 20 fields, whatever you need to transact with Mastercard. That doesn't involve any of the other data. That's just the transaction report. And I think we should differentiate between getting that transaction record so we can get real efficiency and timeliness in the transaction. And I'll come on to what that can enable in a bit. And then we should think about getting all the other data. We'll never standardise all the other data. And stuff that comes in for underwriting comes in so many different forms, from so many different participants, be they brokers, be they clients. I don’t think we should bother even trying to standardise that. We should use some clever technology that brings all that together and creates the standardisation that you want. So if you're a particular carrier, you define how you want it and use technology to bring that together. Not trying to say to everyone “submit this in a standard way”, because they just won't, in my view. So you have some really clever technology up front that allows you to standardise the data in your organisation.
Juan de Castro: And to some extent, what you call all other data, it's also the competitive advantage of each insurer, right? Each insurer will want to catch slightly different data.
Clive Buesnel: Exactly. And this comes back to Mastercard. There's no way Mastercard would allow anyone to have all that customer data because that's absolutely the differentiating data. But it's not bothered about the core record, because that's just what creates the transaction. So getting great data for underwriting and allowing you to look at differentiated risks, select risks that you say are straight through processing or ones that are not in your risk appetite. All of that will not be defined by the core data record for the transaction. That's all the other things that you'll get submissions on. You go out to external data. So that needs really clever technology, but again, upfront. There's no point in waiting weeks or months to collect it or waiting until later in the process and re-keying it all. How do you bring all that together up front in the process? And I see too many people talk about digital, digitisation, well, what they really mean is automating the process. Digitization for me is getting data up front that's irrefutable and timely that then flows through the whole process.
Juan de Castro: And how would you classify the progress the industry has made? Let's start with that, the irrefutable data upfront.
Clive Buesnel: Well, it's making progress. I mean, I think, again, when I look at the Cytora product and what you're trying to do there really successfully, when I look at Blueprint 2, what they're doing in the core data record, progress is absolutely being made. It's not as quick, never as quick as you want, but progress is being made in terms of creating that standardisation.
Juan de Castro: And in terms of the other data?
Clive Buesnel: So I think people obsess too much about efficiency as well, in terms of, yes, data is useful to create efficiency. And there's no doubt that if we can create the core data record that we're talking about in the Lloyd's market, that will enable a more efficient process, it will enable a much quicker and timely process. But what I'm really getting excited about is what that enables us to do in terms of when you collect all that data, freeing up people's time to make better decisions. Freeing up people's time to not have to constantly think about things that could be quite easily automated, to make an automated decision. So you're really allowing people to focus on the things they need to focus on in a better way, giving them more capacity. And that really is the enabling, which I think is much more powerful, ultimately, than the efficiency point. Taking 2% or 3% out of your cost base is, yes, useful, but allowing your underwriters to have twice the capacity to underwrite more in an efficient way is much more powerful.
Juan de Castro: So you see efficiency as a means to free up underwriting capacity?
Clive Buesnel: Well, I think both. I think you’ve always got to focus on how efficient your organisation is from a cost point of view. But really, the efficiency there is freeing up capacity for the most important people in the organisation, be it underwriters or brokers in the insurance world. How do you free up their capacity to process more effectively or to make better decisions when they're making decisions?
Juan de Castro: So you're just building on that freeing up capacity to work more? Is it freeing up capacity to be able to spend more time analysing risks?
Clive Buesnel: You could say you can do quite well because you've got more time, or you can concentrate more time on the really important risk. And by the way, when you're doing that, you've got the data all coming together in a standardised, curated way that you understand and present it, et cetera. So you can, as an underwriter, for example, say, look, I've got all this thing curated for me, now I can concentrate on where I'm adding the value, which is my judgement of whether this is a risk to write or not. So making better decisions through better information, but also having the capacity to almost make more decisions because you haven't got to worry about flexing this data yourself as it's presented to you.
Juan de Castro: Okay, so let's play it through, all right. In what ways is it different in the day of an underwriter once you've got all this data captured in an irrefutable way up front? What does the rest of the day look like?
Clive Buesnel: Well, hopefully more interesting because you're actually doing what you're a specialist in. You're not spending time having to sort through emails and sort through presentations trying to find the information. So hopefully more interesting. Secondly, you're using your time more efficiently. So you're actually concentrating on making the underwriting decision. But also you're in some ways delegating where you're comfortable that actually the criteria has been satisfied, you don't have to look at it. If it's a simple risk or it has certain parameters you're comfortable with, then allow the machine to make the decision. So you're concentrating on the more important decisions and more of your time is done underwriting rather than let's loosely call it administration or putting together data.
Juan de Castro: Yeah, manual activities. Often we talk about how difficult it is to change behaviours, specifically in the London market, but across the whole insurance industry. What is that kind of change management curve of underwriters getting more comfortable using data, relying on some of the decisions being made?
Clive Buesnel: Yeah, it's sort of a slight double-edged sword, because I'm sure if you talk to anyone, they'd say, “I’d much rather spend my time underwriting and doing that and making decisions rather than pulling data together or sifting through documents trying to find things”. Having said that, ultimately you'd argue you don't need as many underwriters. The truism of this is that if you do that, or you're going to have the same amount of underwriters and your organisation should be two or three times the size which hopefully is the more positive outcome of that, but there is that whole change of what does it mean for people? Do people accept it? Are they really analytical about understanding where all that data-, and then trust is, in some ways, the engine that's pulling that together, rather than having to do it themselves, which again they traditionally don't.
Juan de Castro: This is something that the whole industry has been talking about for a while. Many carriers are making more progress than others. Where is this going to end up? In the sense of, will then the more forward-thinking carriers who are starting to digitise all the workflow, and digitising data for freeing up? As you said, the book could be twice, or three times as hard for the same number of underwriters. Is there an option for those who are not embarking on this transition?
Clive Buesnel: That's a good question. I think change is inevitable. And I think what we're going to tend to do, like most things, is overestimate the change in the short term, thinking it's going to happen in the next two or three years and underestimate the change in the longer term. And I think within the five-year horizon, I think we're going to see some quite dramatic change in the way businesses are operated and the way data is curated, et cetera, and genuinely start seeing straight-through processing and risk arbitrage and those sort of things that we're talking about today. And I don't think it will be in the next two years, but in the next five years, I think we'll see some quite dramatic changes. And then that will go back to what are the skill sets required for people to be successful in the future? And much more analysing data, understanding the sort of what's presented to them better rather than having to trawl through documents. So these are people that are going to be more data-rich than they've ever been.
Juan de Castro: Yeah. You picked an example. This isn’t going to turn 180 degrees in two years, but we will do well in five. But part of the challenge is if you compound, first of all, the time it takes typically for insurers to make decisions, investment decisions, they are typically linked to planning cycles, annual planning cycles, to often one year behind where the investment is going to kick off. That's one. And the second one is alongside that is what we call the change management side, right? So if you just compound those two things, by the time an insurer starts thinking about making this type of investment, to the time they're actually capturing the value, two or three years might go away right away.
Clive Buesnel: Yeah. That's why I think we're not going to see this dramatic change we might imagine. I mean, if you read the articles, we are convinced as an organisation there is more and more time, money being spent on data, technology, AI, than we've seen before. But as you say, that's going to be a two to three-year cycle for that before we really start to see the change come through.
Juan de Castro: Let’s now zoom out a little bit. So we talked about digitising those underwriting workflows with benefits for underwriters and the carriers. What other new capabilities, use cases, or opportunities are there in the market?
Clive Buesnel: So the one I'm actually excited about is, again, if you can enable this irrefutable, timely core data level at the point of buying. So when the risk is bound, you have all the data. So if you're in an exchange, you talk about T plus 2, T plus 3, et cetera. At the moment, we're T plus 50 or T plus 100. I mean, we don't really know when we actually get the data. But if you can rely on that at the point of buying within, I mean, theoretically within seconds, but let's say within a day, where you've had that information, you can then start creating reliable indices. Start to show how the market is performing, because you know the data is accurate, and you know it's timely, and it's irrefutable. People aren’t going to say, well, where did you get that from? Is it accurate, et cetera? Then, those indices, in my view, will enable the creation of a secondary insurance market for specialty risks. And for me, there's no better place to do that than London, Lloyd's, where the real volume is, the size is, et cetera. And then you can have a secondary market where you can imagine a world where you've got a future on D&O insurance. So you're looking at the indices, spotting the trend, going to your clients saying, I think that the market is moving this way, let's look at the indices over the last X months, would you like to buy a future on your D&O insurance? Suddenly, we've got a secondary market. We have a whole new set of products to sell. Brokers would love that, the new products to sell. And also, you've got the capital providers saying, well, I'm now understanding the market much better. And often in exchanges, the secondary marketplace becomes bigger than the primary market. But you've got to have that fundamental data reliability that we don't have today. Well, that for me gets really exciting. It comes back. That's not an efficiency play. That's enabling a new market positioning, a secondary market, et cetera. It doesn't exist today. And I'm very excited that that should be London. I think we're doing a lot of things that mean it could be London. I'd like it to be quicker. But I think certainly in the next five years, we are going to see a secondary market. And I think it will be enabled by data.
Juan de Castro: So what would need to happen for that to be a reality? So you've mentioned this availability of near real-time data is an obvious one. What else?
Clive Buesnel: Well, I think people need to imagine products. People need to think about what that would look like and what a derivative product looks like in insurance and start being creative and innovative. Again, I'm very supportive that the innovation is always kind of on it, but it doesn't matter what those products look like. Let me tell you another analogy here. If you listen to music sometimes, now you can have music everywhere. You can have it piped around the house. You can have it on your iPhone, et cetera. Or you could sit in a room and put a vinyl record on. Not that I'm suggesting we go back to sort of the basics of vinyl. What I'm saying is to differentiate it. So I think it comes back to the fact that we need a small core data record that defines the transaction of the industry that can be used to create the transaction, define the basic data that will go into the indices, and we need the ability to get all this other data together in a timely way. And I always look at it differently, there are slightly different problems to solve. Let's not imagine we'll ever standardise a huge amount of data. We won't. We will hopefully standardise a core record and then have really clever technology that brings all the other data together. Those two things operate in parallel. And then if you do have that marketplace, you'll have the indices based on the core data and then access to a whole lot of other data that decides whether you think that product is worth investing in, in terms of the drift.
Juan de Castro: And what's the right player to actually create the marketplace itself?
Clive Buesnel: I personally believe Lloyd's. I believe Lloyd's has the ability to do that, has the wherewithal, the financial backing, the brand, et cetera, to create that secondary marketplace in London.
Juan de Castro: Yeah. Well, we should do another podcast in three years' time and see what that initiative is.
Clive Buesnel: Well, I hope so. I mean, it's so exciting, though, because I really think we're in this journey of people generally now realising what data can do in the insurance industry and really getting behind it. So I think we are now really seeing acceleration.
Juan de Castro: Yeah. I agree with you. I think if we go five years from now, one of these things where we're looking back, because right now, probably the secondary marketplace looks more like a vision than a reality, but it's not. I'm totally with you. In five years' time, we'll look back and it will be an obvious expansion of that market.
Clive Buesnel: The thing for me is having enough vision to say, let's not just concentrate on things like this core data record for an efficiency play. It'll probably never justify itself on just an efficiency play. It'll only start to justify when you see what it can enable in terms of future opportunities.
Juan de Castro: Once again from this marketplace, what are your views on what else is going on in the market we are seeing a lot of movement around MGAs, a lot of MNA activity, what do you think the next few years are going to look like?
Clive Buesnel: Well, first of all, I'm very optimistic about the industry because I think we are fundamentally in a world of escalating frequency and severity of global risks. So I don't think we're going to see premiums continue to grow. We're going to see the severity of risk continue to grow. We're going to see products having to come in to satisfy the new green world, the environmental world. There are the products, the traditional energy products we see today are not going to be the products we're going to see in five years' time. So from a risk point of view, we continue to live in an increasingly risky world. Therefore, insurance is going to continue to play a very pivotal role in that world. There may be some big black swan event coming in the future, however much risk prevention we do, the risk seems to be always ahead of the risk prevention activities we're taking. So optimistically, the industry will continue to play a massively pivotal role in our global world. The second thing I think that's interesting is talent in the industry continues to be one of the biggest challenges. It hasn't been the most attractive industry to come into historically. People are now beginning to see it, I think, more as attractive. But the people who are in the industry are hugely valuable. And therefore, they're being poached to go into different organisations. They're becoming very aware of their contribution and value. Therefore, they're being very demanding about what they're awarded and even the structures. So we may even see people coming out of carriers, for example, to go into MGAs, just because they can see they may have a more lucrative structure to operate in. So I think talent will be a major part, again; how people manage talent, attract talent, rotate talent. It continues to be a major part of the industry's challenge over the next few years. Especially when we talk about some of the things we've just talked about. As the industry changes, again, the people who can enable that change will be very valuable.
Juan de Castro: And that is something also we see with many of our clients. There's also a big challenge in just attracting new talent into the industry. Just younger talent are more keen on joining an organisation where the process is digitised, where data is available, et cetera. So almost going back to the start of the conversation, having a more digitised insurance industry is not just better for the industry, but it's also a way to attract new talent.
Clive Buesnel: Yeah, and as people start to realise, it's an exciting place to be in the transformation, much like the sort of tax disc for the car. If people could imagine that world in five years' time, this would be a very exciting place to be.
Juan de Castro: Definitely, and from an MGA side view perspective, any news?
Clive Buesnel: MGAs are interesting to me because people talk about new MGAs. I mean, Lloyd’s started as an MGA. We've been able to recognize Lloyd's of London as an MGA, where you've got a separation between the underwriting and the capital. And so there's nothing new about MGAs, but in the last few years they've become very valuable and people have realised the value of them. As long as they're performing, and I would say, an MGA has to have an excellent track record of underwriting capability and quality. That's number one. Secondly, it has to have a diverse capital base. And thirdly, it has to be growing. Then they are very valuable entities. And people are thinking more creatively about MGAs. And some carriers are saying, I want my balance sheet business and I want an MGA alongside it. And we're seeing that. We saw the separation of the business in the case of Fidelis, where the MGA underwriting business separated from the capital. But there's nothing new in MGAs. At the moment, the value continues to be high as long as it has the quality I talked about in the business of underwriting performance, diversified capital, and growth.
Juan de Castro: Do you think it makes more sense, because right now you've got both brokers and carriers setting up MGAs.
Clive Buesnel: This is always the case. I mean, underwriters are always trying to go upstream and get closer to the client, quite understandably. Brokers are always almost coming down the street, saying, I'll do more of the underwriting. This has always been the battleground as brokers and underwriters are overlapping. And we'll continue to see that. And sitting right in the middle there now are these MGAs, right? So brokers want MGAs and carriers want MGAs, because they sit right in that middle zone, in my view, between the brokers and the carriers.
Juan de Castro: Yeah. From an M&A perspective, consolidation, data decisions, IPOs perspective, do you also see this MGA space as the one with the highest activity in the next few years?
Clive Buesnel: At the moment, I mean, private equity obviously plays a massive part in our industry. And over the last few years, private equity hasn't been so keen on balance sheet businesses. And when I mean so keen, they can still get better returns for a risk profile investing in asset-like businesses such as MGAs or brokers. And we've seen that. So I think we've seen, part of the major investors in the industry preferring to be in MGAs and brokers rather than balance sheet businesses. And I think that trend will continue. Now, as interest rates come down, et cetera, we might see that get rebalanced. But the trend at the moment, I think we will continue to see a lot of the investment going in those asset-aligned businesses.
Juan de Castro: Into brokers and MGAs.
Clive Buesnel: Yeah. But I think the M&A activity generally, obviously, we've gone through it. It's reduced. I think in 2024, we're going to see it increasing again as interest rates start to come down and a lot of capital that hasn't been deployed, I think we're going to see the M&A activity come up.
Juan de Castro: We're waiting for good opportunities. That's being redeployed.
Clive Buesnel: So I think we're going to see M&A activity increasing in 2024.
Juan de Castro: So again, what else do you see as any other major trend in the industry?
Clive Buesnel: We talked about, obviously, the increased investment in data, technology, and AI. I think IPO activity will increase. The other one I would say, there are some very large companies out there where it's going to be very difficult to do anything other than an IPO. So I think then we may see some larger IPOs coming. The market is still a bit depressed at the moment, but I do think in 2024, the IPO market, we will see increased IPO activity.
Juan de Castro: When you say IPO, it's IPO carriers or MGAs or brokers?
Clive Buesnel: All three. Certainly, I think there are some big brokers out there that will go down an IPO route. The other thing is the growing U.S. E&S market. I think we're seeing more and more businesses come out of the admitted market into the E&S market because they haven't got constraints within the admitted market. So the U.S. E&S market will grow and will be very attractive. And so I think that we'll see that growing. I think the other thing is we will see potentially less of that E&S market come to the UK. You're seeing some carriers setting up vehicles in the US just to make sure they're trying to continue to catch that market if we don't see it coming so much in the UK.
Juan de Castro: And what is driving that growth in the E&S market?
Clive Buesnel: I think because it's easier to write business in the E&S market. It's more attractive. You can set your own pricing, et cetera. And again, as risks become more complex, come back to, we're seeing the non-standardization coming more quickly out of the admitted market into the E&S market. And again, the constraints around pricing, et cetera, don't exist in the E&S market.
Juan de Castro: Okay.
Clive Buesnel: And the other is the growth of new products. I think we are going to see a lot more new products. Cyber is going to continue to grow. We're going to see more products addressing environmental change, climate change, et cetera. Which is why I remain so optimistic about our industry. With the changes that are going from that point of view, plus the continued riskier nature of our world, we have a very exciting future in the insurance industry.
Juan de Castro: It's been fantastic to go from on the way down from the data and technology and the opportunities for carriers to capture efficiency, but really efficiency to deploy, to create underwriting capacity. We've got the bonding, creating a business and the secondary market in Lloyd's, which is something very exciting. And I'd say for the last 10, 15, 20 years, we've been talking about how do we make sure Lloyd's stays relevant in the global market? I think this is a fantastic opportunity to have that. And then going into all this, M&A, IPOs, MGAs, trends, which I think sounds like you are very positive about the market with plenty of opportunities.
Clive Buesnel: Absolutely. Yeah.
Juan de Castro: Yeah. Fantastic. Well, Clive, thank you so much for joining me today. It's been fantastic to have you.
