When you ask the heads of specialty underwriting practices just how much business opportunity is out there, the volume of their responses might seem a tad overwhelming. From health care to infrastructure to renewable energy and carbon sequestration, those with the capital and underwriting talent to put that capital in play have their work cut out for them.

Add to that the technological developments that are currently giving underwriters a better handle on risks and there may be no better time to be a specialty underwriter.

“I think that right now, the ability to put up products, to enter the market, to use innovative ways of launching businesses through the use of AI and other cap­abilities and the accumulation management that is now available … It’s the most exciting time in my career,” said Dan Riordan, a veteran of the specialty underwriting space who now heads up political and credit risk for MSIG USA.

Not that this work will be easy. “The world’s a changing place,” Riordan added. “We have to be able to pivot. You cannot just create something and hope that they will come. You have to create around the changing needs that are out there.”

Matt Dolan, president of North American specialty and Ironshore for Liberty Mutual, points to the constant evolution of businesses and the opportunities that creates for nimble specialty underwriters.

Cyber, carbon sequestration and opportunities in the digital delivery of health care are three risk transfer areas Dolan ticks off when asked about landscapes where he and his team feel they can successfully respond to the emergent risk issues insureds are confronting.

The recent CrowdStrike software update debacle that interrupted busi­nesses in every sector of the economy is just one example of how complex and fast-moving risk is and what the opportunity to transfer it can look like.

“We are investing very heavily in our cyber capabilities because it’s a solution that insureds across all economic sectors need,” Dolan said. “They need the risk transfer product. They need the expertise. They need risk management and risk mitigation services.”

Small Business Plus New Technologies Equals Room for Growth

Those that wring their hands at the state of the U.S. economy might want to talk to The Hartford’s Adrien Robinson.

Robinson, EVP of global specialty for that carrier, noted that in 2023, according to the U.S. Chamber of Commerce, there were more than 5.5 million applications to start new small businesses in the U.S.

Adrien Robinson, EVP of global specialty, the Hartford

“So that’s a whole subset that is growing,” Robinson said. “The U.S. economy has been tremendously resilient, despite a lot of global challenges.”

That ongoing small business growth is something that Robinson and his team are paying close attention to.

“We see at The Hartford a huge opportunity to lean into that space,” Robinson said.

“And by the way, I think we are very uniquely suited to serve it. We’re already one of the largest small business commercial underwriters and we have a wide distribution net­work that’s already geared towards that segment.”

Robinson added that The Hart­ford is also keen to have a look at risks in the logistics business, onshore manufacturing and large construction projects.

Infrastructure, which sees heavy investments from federal and state governments, is another area of interest, according to Robinson.

“Infrastructure, in some words, is synonymous with large projects — things like airports, transportation, bridges, tunnels, waterways; the scale and complexity of those types of projects generally end up in the specialty space,” Robinson said.

“There’s a little bit of a manufacturing resurgence in the United States in some ways, born out of the pandemic. Certain products post-pandemic were deemed strategically important and probably need to be manufactured here,” he added.

Like Liberty Mutual’s Dolan, Robinson thinks the carbon seques­tration market is a grand place for specialty insurers to be, given that so many companies are under regulatory pressure to lower their carbon footprints.

“That’s a really attractive segment to be in,” he said.

For Arch’s Amy Berman, it’s not so much the economic sector that determines her group’s appetite for risk as it is the profile of individual companies within each segment.

Berman, regional vice president for assurance at Arch, said that even when a company or sector might appear to be distressed, her team is willing to get creative and take a closer look.

“Arch has a broad appetite across a variety of economic sectors, and when we’re looking for the most attractive underwriting opportunities in the management liability space, it’s a little less about the economic sector, and more about the key under­writing metrics and exposures,” she said.

“Given the macro environment, we place a strong emphasis on financial condition. When it comes to severity, bankruptcies are one of the largest areas of impact on our private book,” Berman said.

“As interest rates rise, there is an expected increase in the number of liquidations, reorganizations and bankruptcies in our current book of business,” she continued.

“That said, in the middle-market space, we see a lot of companies that may appear to be in distress, but if there is a story around the financials that we can get comfortable with, we may be more open to hearing that than other markets are.”

Within Limits

With so much business out there, and an ever-changing landscape to challenge underwriters, you might think that the sky is the limit when it comes to specialty underwriting opportunities.

But there are factors in the mix that limit how much business specialty underwriters can do.

One of those is the ever-present bugaboo of talent shortages.
With tens of thousands of commercial insurance veterans on the brink of retirement, finding and retaining the underwriting talent to take advantage of market opportunities is a real challenge.

“We talked about energy, renewable energy and cyber risk,” The Hartford’s Robinson said.

“There is not enough talent in these newly emerging subsegments, frankly, to fully understand and fully underwrite the risk,” he continued. “We can’t bring in the talent fast enough.”

Although there is a lot of excite­ment about AI, Robinson said, how many underwriters really have the knowledge to understand what kind of risks generative AI presents?

“Scarcity of talent from subject matter experts who really understand these new and emerging risks is definitely an inhibitor.”

When we asked Liberty Mutual’s Dolan how intense the com­petition for underwriting talent was among specialty underwriters, the normally expansive Dolan initially had a one-word answer: “Fierce.”

He then went on to highlight the importance of having a culture that actively engages and attracts the best and the brightest by enabling individuals to bring their authentic selves to work, rewarding performance and embracing collaboration.

“Talent is fundamental,” Dolan said. “Underwriting talent, claims, actuarial, financial talent — all the critical components of a multidisciplinary insurance carrier are absolutely vital. Nothing happens without world-class talent.”

Dan Riordan, head of political risk and credit, MSIG USA

MSIG’s Riordan, who has spent more than 30 years in the industry running multiple products within specialty insurance, said that it’s nice to see carriers drafting talent from university risk management programs.

But, he said, it’s the veteran talent that is most needed to roll out the products to compete in this environment.

“To launch a product, you have to have the relationships in the market with the brokers and with the clients. You have to have a real under­standing of specialty areas, because specialty areas are challenging. Having that depth of knowledge and having lived through different market cycles is important,” Riordan said.

Conversely, Riordan said that the newer talent coming into the business — much of it more conversant with technology — will end up being just as vital to the industry in its time. And knowledge transfer will be an important part of giving that new talent its best shot at succeeding.

“When I’m thinking of hiring interns, I’m thinking of future team members who will be the emerging talent in underwriting specialty classes. There’s a good amount of highly experienced people, but if we don’t have the next generation ready to step in, a lot of that can get lost,” he said.

Another limitation on how much business specialty underwriters can do is the availability of reinsurance.

Particularly in the property area, which has been hard-hit by more frequent and intense storms, reinsurers are not offering the capacity that they were two or three years ago.

“The inability to get reinsurance at satisfactory terms could affect certain specialty insurers,” Arch’s Berman said. “It may be tough for new capacity to secure favorable insurance terms given where we are in the market.”

Yet another barrier to business growth in specialty under­­writing is overregulation. Specialty insurers need to be able to pivot quickly to react to market conditions and the needs of clients.

“Again, what is the specialty market fundamentally about?” Robinson said. “It’s the relief valve for the admitted market, which the admitted market needs some­times because it can’t change fast enough to handle new, emerging and dynamically changing risk.”

The opportunities for specialty insurers are so many that they are too numerous to be listed here.

Talent restrictions, regulatory whims, reinsurance capacity and the unpredictability of our weather appear to be serious limiting factors, but with so much business out there, it may be only a question of how quickly specialty insurers can move to take advantage of it. &