Anand working on tech-driven SME E&S platform

Former Hallmark Financial Services CEO Naveen Anand is in the early stages of working on a new SME-focused E&S platform that is expected to include a tech-driven MGA structure and potentially a participatory fronting carrier, The Insurer can reveal.

According to sources, Anand, who officially left US specialty insurer Hallmark late last month, is targeting the small to medium-sized business segment of the $65bn E&S market.

It is thought that the executive – who is also the former head of Torus in the US – has made progress in initial funding discussions and is working with a reinsurance broker.

With a platform build-out likely to take the rest of the year, the start-up is expected to target a launch in early 2022.

The thesis behind the initiative is likely to be based on combining an SME E&S platform with significant digital capabilities that would aim to drive superior underwriting returns and cost efficiencies.

Although the exact business plan of the venture is not known, sources said that the likely model would involve the formation of an MGA vehicle, including the addition of underwriting talent that would have access to “in-house” paper in the form of an AM Best-rated participatory fronting carrier.

The emergence of the hybrid MGA-carrier platform has been notable over the last year, with several examples of business models that combine underwriting capabilities either in the programs or individually underwritten risk space with guaranteed access to paper, typically backed by reinsurance capacity.

Access to capacity has been a key challenge for many MGAs in the last few years as domestic US carriers and Lloyd’s have tightened their appetite and repositioned their books of business in the hard market.

UW and cost efficiencies

Sources said Anand’s proposition is likely to seek to differentiate itself by applying technology to the MGA platform in an E&S SME segment that is underserved by platforms specifically targeting improved efficiencies.

The cost of placing and underwriting SME business can make it uneconomical for brokers and underwriters in particular within the E&S market, which has arguably lagged initiatives from aggregators and carriers in the admitted sector to address inefficiencies.

As well as targeting cost efficiencies via a digital platform, the new venture is expected to harness technology from actuarial and data science (including the use of curated data vendors to help segment pricing across the lines of business and products it will offer.

It will likely look to distribute its products through the major wholesalers as well as the second tier of firms that may not have developed the tech platform in-house and would benefit from giving their retail clients access to a digital MGA.

The start-up being worked on by Anand is thought to be targeting both binder business and individually underwritten SME risks in an E&S market that has seen significant pricing momentum over the last two years.

SME business within the E&S market is typically seen as more stable and less prone to the larger cyclical pricing variations that larger account business is subjected to.

Anand spent six and a half years at Hallmark after being drafted in as president and CEO. He was previously CEO Americas and global COO at Torus and has held senior positions at CNA and Chubb.

He resigned from Hallmark in January citing family and personal reasons with his roles of president and CEO taken over by executive chairman Mark Schwarz.

The insurer subsequently revealed it is exploring the separation of its specialty commercial business as its board works with financial advisor Raymond James and broker Willis Re to unlock value after a challenging couple of years that included losses impacted by prior-year development.

Anand did not immediately respond to a request for comment on this article.