One80’s Pesce: Niche expertise vital for PAs’ continued growth
Constrained capacity is hindering some program administrators’ ability to grow, with those that are successful providing niche expertise and not simply capacity, according to Chris Pesce, national programs practice leader for One80 Intermediaries.
Talking to The Insurer TV ahead of this year’s Target Markets conference, Pesce highlighted the “remarkable” growth of program business since 2010. He suggested it is getting harder to maintain the pace of growth after recent years of rapid increases.
“Cat capacity is certainly very, very hard to come by. It will continue to be,” he said. “I think there is a preference by carriers if they're deploying cat not to deploy it through a program administrator, and to offer directly to their agents. That puts a strain on program administrators’ ability to grow.
“Where you see success in program administrators it is not simply in deploying capital. Carriers don't need us for that. They need us for our niche expertise.”
Pesce noted One80 now has over 106 programs.
“We really look for differentiated programs,” he said. “We don't want to be a generalist wholesaler. We don't want to be in the generic program space where we're simply a capacity provider. We really look for professional environments and teams that have true, deep understanding of their niche so that they have that value relationship with the carrier.”
The executive continued that the focus on expertise is evident in One80’s recent acquisitions of transportation MGA GMI and environmental MGA Enviant.
He noted that the deal for Houston-based Enviant from Euclid Environmental Underwriters was an expansion into an area where One80 did not have representation and which “tends to run somewhat counter-cyclical to the standard P&C business”.
In contrast, Pennsylvania-based GMI, which writes in excess of $110mn in annual premium, is focused on an area already very familiar to One80.
“We are very heavy into the transportation niche,” Pesce said. “It's currently our largest industry channel within One80 programs.”
He continued: “Someone might ask why we are adding to that. But GMI brought to the table something very unique. They're in this rental space, which is kind of a micro niche within the niche of programs of transportation. That's why we look for something that is complementary to a channel that we already have, something that runs counter-cyclical to programs that we have. Because it just lends to a smoother growth curve.”
Pesce also discussed the impact the shifting reinsurance market dynamics on the program space
“Reinsurers have really driven this hard market,” he said. “I think ultimately there's only so many capacity providers out there. When you get past the insurance company I would say the majority of it rolls up to the reinsurers. They had enough of the cheap capacity being thrown around out there.”
Pesce said this is forcing the carriers to be more responsible.
“A lot of them are withdrawing their capacity since it's as hard of a market as we've seen in the cat property space, for sure,” he said, adding that Lloyd’s retraction was another big driver of the cat withdrawal.
Pesce added that One80’s diverse portfolio means it is not dependent on cat capacity.