Can do, will do
David Merry, head of Besso Re, sees ‘tremendous scope’ to build up Besso’s facultative and wholesale plays – especially without the organisational restraints faced by rival firms
Could you give us a potted history of your own experience in reinsurance and facultative business, before joining Besso in 2018?
I have spent a good 35 years in global wholesale broking as a broker and leading teams across various classes. Fac has been a significant part of that, both at HLF where I was head of global broking and traded a large global fac portfolio, and subsequently at Arthur J Gallagher where I headed global P&C.
There, I was fortunate to have one of the industry’s first large technical insurers deploy a fac strategy across their energy and construction portfolios. They were buying through me at a time when tech insurers did not generally deploy a portfolio-buying strategy.
My wholesale expertise has been across global property and construction, specialising in owner-controlled insurance programmes for onshore energy and petrochemical developers.
What prompted the recent build-up of Besso’s fac capabilities and the creation of your new role – and what part did you play in it?
The development of Besso Re’s fac team is the direct result of growth ambitions of a business with a firm plan in place, coupled with the market dynamics creating opportunities in the sector.
When I sat down with the leadership team, we considered the breadth and dynamics of the fac and wholesale plays combined. There is tremendous scope to build those areas and the industry opportunity is undeniable.
Not only is building a business lots of fun and a great challenge, but also to lead Besso Re with the base of talent we have hired – including a number of leaders – was a fantastic opportunity. In addition to that, I still hold a development role.
There, my primary consideration was analysing our BGC-inspired model and Besso’s positioning within the industry compared to those of our competition, and being able to demonstrate explicitly areas where we do differentiate.
We have been successful in executing areas of that strategic plan so it was not a case of proving the concept, as the fundamental elements of the strategy were compelling.
Those same elements run right through our business – macro to micro – so to me the bridge between developing the broader business and leading Besso Re was clear.
The beauty for me here is that the practitioners are able to propose and execute initiatives in a “can do, will do” culture without the organisational restraints that are often prevalent in other companies.
You made a number of reinsurance hires last year. What is your strategy/aspiration for growing the team further over the next couple of years?
We are looking to build a diverse team across different territories. We have the advantage of starting with a relatively blank sheet of paper which, coupled with the background of our ownership, means we can offer a different type of home to people of differing ages and backgrounds; from established producers to young, tech-savvy talent and provide them a platform to build their careers.
What territories are you concentrating on for producing fac business and what do you anticipate would be the approximate weighting of your book by territory?
Needless to say, the business is global and therefore our ability to serve our clients globally is absolutely key. We will look at established as well as emerging markets, with an initial focus on North America, Asia and the Middle East. We will also be building out territorially to ensure that we are where our clients need us to be.
Equally, what kind of facultative risks are you looking to place?
We are looking at various classes – in particular mining, power, commercial property and energy, as well as casualty across all classes. There are currently huge market corrections happening in cat and right across the technical classes – there is a perfect storm going on in energy for example – and a number of issues in construction and power. That kind of situation creates opportunity.
What kind of client base are you targeting?
Largely, we are focusing on heavy industrial risk, which means we are mainly looking at global cedants and regional and domestic players in areas like mining, power, commercial property and energy.
There are a number of MGA and facility writers that are looking at their portfolios and these may present some opportunities, but structuring is key, as blanket capacity plays are simply not possible in many areas.
What is your outlook for the fac reinsurance market for 2020/2021, in terms of client appetite, capacity, rates etc?
The market is tough but it’s not without its opportunities. The rating environment for wholesale and fac will remain robust with certain industry sectors and territories experiencing conditions that are, if not unprecedented, then are close to being so.
There is still new capital entering the market, but much of this is highly targeted and relatively limited so it will not have an impact on the rating environment for the foreseeable future.
With upfront underwriters getting tremendous price hikes, some increases will transfer to the fac market, but primary will be very difficult.
We think that new capacity will focus on less technical areas and the mid-to-higher placement layers, which combined with the number of clients looking to the fac market to protect net and treaty in a really intense way will create good opportunities for underwriters.