AmTrust's Dewey: 'We want to be the go-to market for niche risks'

AmTrust International, the international business division of US-based specialty insurance group AmTrust Financial Services, had one of its best years ever in 2022.

The business, which underwrites through four insurance companies in London, Leeds, Dublin and Milan and through a stable of five managing general agents (MGAs), generated gross premium income of more than $1bn and posted a combined ratio of less than 90% last year.

That momentum is being maintained in 2023 and AmTrust International is currently on course to deliver an even better performance this year, according to Peter Dewey, the division’s chief executive.

AmTrust International underwrites a global portfolio of warranty and special risks, medical malpractice, legal expenses, mortgage and credit risks, niche property and professional lines. The latter mostly consists of a very large portfolio of professional indemnity business in the UK.

The division underwrites more than 90% of its business in the UK and Europe at present, but also has a growing presence in other territories such as the Middle East, Asia, Latin America and Canada.

“Over the past two years the underlying performance of our products has been strong and consistent across our portfolio, but we can’t take anything for granted. It is about monitoring, managing and analysing the risk and claims data and then reacting very quickly to what the data is telling us”
_{Peter Dewey
AmTrust International}

Alongside the geographic expansion, there are also plans to acquire more MGAs and to add another line of niche specialty business to the product offering if the right opportunity presents itself.

“We got off to a great start this year,” Dewey says, “but we want to be consistent. We want to continue to build a presence in our core lines and to be known as the go-to market for those niche risk areas we are in.”

This is a very different position from the one AmTrust International found itself in 2018, when AmTrust Financial Services’ majority shareholders joined forces with private equity fund manager Stone Point Capital to take the group private.

The change in the corporate status coincided with a review of the group’s structure, product lines and future direction. This entailed the restructuring of AmTrust International, including selling off its Lloyd’s business to Canopius and exiting a number of other businesses within the division.

Exiting Lloyd’s

At the time, Dewey was chief executive of AmTrust at Lloyd’s, but shortly afterwards was appointed to the top job at AmTrust International and given the task of reshaping the business.

It was a question, Dewey says, of taking a critical look at all the portfolios of companies and products within AmTrust International. “Of all the business we had at the time, probably 80% was core business, which was performing very well and had done so over a long period of time. But changes were required,” he says.

“We had to ask ourselves: ‘In which product lines do we have the necessary scale, underwriting expertise and data to compete effectively in the current market and economic environment? What are the barriers to entry for potential competitors in those lines of business?’ Also, we wanted a breadth and range of products that would allow us to create a portfolio of non-correlated risks.”

The decision to leave the Lloyd’s market was a tough one, but it made a lot of sense for the international division, Dewey says. “In one way, it was a very simple decision. We wanted to be a niche player and AmTrust International did not want to be catastrophe-exposed, so at the time, when we looked at our port­folio against those criteria, our Lloyd’s business was not a comfortable fit.”

He continues: “And we never felt we had a strong lead position in that [Lloyd’s] market. Now, we really do believe we are market leaders in the lines of business and in the territories we are in and we see clear paths for growth in those lines of business.”

AmTrust International is the undoubted lead market for warranty insurance, its largest line of business. In addition to automotive warranties, it also provides warranty covers for commercial plant and equipment, and for consumer electronics such as mobile phones through manufacturers and airtime providers.

Predictable performance

All the division’s lines of business performed very well last year, according to Dewey. “One of the strengths of our business is that while we don’t have a line of business that operates at a loss ratio of 30%, we also don’t have one that produces a loss of 200%.”

Indeed, the loss and expense ratios of AmTrust International’s products tend to fall within a tight band and are, therefore, relatively predictable. “Over the past two years the underlying performance of our products has been strong and consistent across our portfolio,” Dewey says, “but we can’t take anything for granted. It is about monitoring, managing and analysing the risk and claims data and then reacting very quickly to what the data is telling us.”

This, he says, applies to AmTrust International’s portfolio of Italian medical malpractice business – its second-biggest line of business, after warranty. “We entered the market in 2009, so this is our 14th year in the business now. We have got a lot of our own data but, more importantly, we have got around 200 people in Milan who manage the business from end to end. We underwrite and process the claims through our Italian insurance company.”

MGA expansion

Distribution and managing the costs associated with it are key issues for AmTrust International. More than 60% of the division’s gross written premium is from business that is delegated to MGAs it owns and controls. It also delegates business to third-party MGAs.

AmTrust International is always looking to acquire new MGAs, but it is a delicate balance, Dewey says. Acquiring an MGA can restrict the ability of the division to work with other MGAs because of the niche and very specialist nature of the business.

“We would look to acquire another MGA if it was the right opportunity, at the right price,” Dewey says. “This could be via the acquisition of an MGA or we could hire a team of people we could set up as an MGA.

“We offer quite a strong value proposition to MGAs, which enables them to go into the year knowing they have got a consistent source of capacity. Conversely, as long as our MGAs are performing well, it allows us to go into the year not worrying about a large MGA switching capacity.”

MGAs acquired by AmTrust International continue to operate under their own brand “and, where there is an opportunity, they can use third party capacity as well. Not everything fits our appetite”, Dewey says.

Bolstered by its recent performance, AmTrust International is focused on growth – but not growth for growth’s sake. “We know only too well things can change. But we believe there are opportunities amid the challenges for the lines of business we are in,” Dewey says.

Expense management will be key for AmTrust International over the next three to five years, he says. “It is about us being comfortable with the expense base as the business grows. But it is also about investing in technology and other solutions and to improve capital efficiency and our return on investment ratio.”

Dewey is looking to grow the business, not only in territories such as the Middle East and Asia-Pacific, but also, for some lines of business, in the UK and Europe. “Professional indemnity, for example, has benefited substantially from the hard market,” he says. “Although, in terms of our risk appetite, we are not particularly looking for significant growth in that line of business, we do see an opportunity in niche areas of property and mechanical warranty to grow quite strongly.”