In the specialty insurance market, there is an undeniable reality – nearly everything that happens globally will impact traditional lines, sending many clients looking for alternatives in the specialty arena. That is the landscape in which AXA Canada’s Specialty team excels. It is an environment where geopolitical risks, terrorism, cybercrime, energy transition, and the frequency and severity of claims have dominated the insurance industry.
For Alex Barker, Head Specialty, Canada, the mission is to bring comprehensive products and resources for clients in everything from aviation and commercial bonds to technology and transportation and beyond. In the recent hard market that put pressure on pricing and availability, the myriad risks that the Canadian Specialty division handles has become that much more complex. With offices and experts through the country, the Specialty team has been expanding and adding more product offerings and, importantly, more knowledge to help clients improve their businesses.
In a recent conversation, Alex discussed the insurance landscape in Canada and how global challenges as well as regional ones have impacted the industry.
What are some of the issues and challenges that you see impacting the Canada specialty market?
Alex: The reality is that there are obvious high-level macro concerns around geopolitical instability. When you consider some of the specialty lines that we participate in, whether it is political risk & trade credit, terrorism, aviation or marine, they are directly impacted by the global geopolitical environment. Canadian industries are selling in that global market as well as buying insurance in that same environment. For our clients and our team, instability in these various regions is top of mind.
On top of that, you have inflation and increasing borrowing costs. We’re in an affordability crisis. As a specialty unit, we have opened lines of business that are doing an excellent job of addressing those challenges for clients. We have had a lot of market growth in the commercial bond space, a line we launched just 18 months ago. When you think about inflation and rising borrowing costs, that is where clients can use this product to offset capital risks that are locked up in certain contractual requirements. We’re seeing a significant increase in demand for that product.
In general, we’re seeing an increase in demand for all the specialty products that we sell. When you have a challenging geopolitical and economic environment, demand for both the product and the specialized knowledge that we offer only increases. Our business has doubled in size over the last three to four years. I believe a big part of that is a flight to quality. Clients are looking to us to help them address a growing number of financial and political challenges. Clients are open to a more complex risk transfer conversation and solution.
Q: What other challenges are you seeing?
Alex: Another thing that is really impacting specialty business is energy transition. Our team in the trade credit and commercial bond areas spent time in Alberta talking with traditional energy producers and financiers, discussing the renewable energy transition. We are the forefront of that, whether it is financial institutions looking to us to be part of that early grassroots investment or on the commercial bond surety side clients looking for products to support the complex contractual and capital environment.
We are working hard to transition the narrative more toward that transitionary renewable space, that is where we see lot of opportunity across the specialty space. We’re in a unique position to address these challenges with offices and specialists across the country.
When you have a challenging geopolitical and economic environment, demand for both the product and the specialized knowledge that we offer only increases.
Q: How has the specialty market in Canada evolved over the last four or five years?
Alex: The insurance industry globally went through a challenging time. We had underperforming insurers. We had financials that were not making sense, and we had a lot of players that frankly got into specialty business, probably without deploying the expertise and knowledge required to be successful, so they quickly exited. In the last five or six years, we have seen a lot of people running specialty insurance businesses that are no longer around.
We have also seen carriers like ourselves really rise to the top and really demonstrate our value and why we do have experts that are aligned closely with the product and the industry that they support. For us, we have a whole breadth and depth of expertise beyond just underwriting – claims, for example – that support the specialty industry. As risk complexity grows, the flight to quality continues. Clients and brokers have looked at who they might be able to rely on long term and who will understand the risks they are underwriting.
During the recent hard market, we have written more products and services than ever before. We have actually deployed more expertise and knowledge and hiring people with backgrounds in those areas. We have grown our aviation, commercial bond, terrorism, specie, political risk & trade credit books, and we’re slowly and incrementally growing our marine book. When markets exited and restricted their capital and capacity, we have filled the void with quality, long term expertise, capacity and knowledge.
Q: How does the Ecosystem approach benefit your clients in Canada in particular?
Alex: We believe in client centricity – supporting clients beyond the policy. That is beyond simply buying an insurance product. It is that value beyond the policy, those products and services from our highly valued third-party partners where our clients can find that extra level of support that helps mitigate their risks.
The Ecosystem makes us part of our client’s world. If they need opportunities, technology, new risk management solutions, innovative solutions to managing new and emerging risk, we provide the link to those resources. When we can bring the loss costs down for them and for ourselves, there is the potential to share in the risk improvement with clients, better pricing and accepting their risk. The Ecosystem approach gives us a partnership with a client that goes well beyond an insurance product.
That is the key to building a client relationship. Sitting in front of a client is not just about trying to sell insurance. It’s about you listening to clients, understanding, digesting, and then offering solutions. We want to help you be better in your industry. We want to support you to become a better business. We want to help you be successful, and the Ecosystem and that client centricity approach is exactly what the focus is.
We are unique in the market at present, we’re willing to sit down in front of a client and have an honest conversation about the market, its challenges, their own challenges, and our desire to partner long term with them in a transparent and honest way. We're providing these solutions in the Canadian domestic market, and we're doing it through the lens of the client. Our approach is to understand the people behind the business, understand the risks, and offer a niche, bespoke product as well as a wealth of expertise and industry knowledge to help them succeed.
