Hanson: CrossCover to expand line size to $50mn and explore product line expansion

CrossCover is upping its property line size to $50mn from 1 June to address ongoing opportunities in the segment, and is eyeing expansion into other classes of business, according to founder Scott Hanson.

Hanson spoke to The Insurer TV on the sidelines of last week’s Target Markets Mid-Year Meeting in Tampa, Florida.

“It was really about the stress of the market, the property market, specifically over the last seven years,” Hanson said, detailing the MGU’s successful launch and ticking off severe storms like Hurricanes Harvey and Irma as impacting market conditions.

“But what was different, I think at that time, was how long the tails went on. That you basically had reserves that continued to climb over time,” he explained.

“Some of that was the legal environment – you had the assignment of rights, assignment of benefits, you continued to have the climate change,” he continued.

Factors along with wildfire, freezes, hail and severe convective and the onset of Covid all contributed to standard markets pulling back significantly across the country.

“So, I was sitting there watching these things happen, looking for the talent, seeing what was available, and I thought, ‘Why not come back out at this time and do something a little different?’”

“There were a lot of markets doing cat. I thought, ‘Well, I wouldn't be able to do cat if I tried to come out at that time, but I could maybe have enough cat to leverage to write around the country’, which was now E&S,” Hanson explained.

“So, that was the plan. And by doing that, I thought, we can balance our portfolio, we can actually reduce the reinsurance cost and then reduce their volatility as well,” he added.

Hanson set a goal of having CrossCover write three non-cat accounts for every cat account it writes, but has since ended up seeing the firm write seven or eight non-cat accounts for every piece of cat business.

“When you're writing non-cat business, you better know what you’re doing. You’ve got to have engineering discipline, the kind of people that understand the risk and we're able to attract those people,” he commented.

CrossCover currently has 15 capacity partners and will be expanding its available line size to $50mn from $25mn, effective 1 June.

Wealth creation for staff

Since launching the venture in 2021, Hanson has been adamant about CrossCover remaining majority employee-owned, and has put a heavy emphasis on staff that contribute being able to participate in the upside of the firm’s results.

“You have a cohesive unit and that's what I wanted to extend a little beyond just seven or eight people in management, but to every employee that actually contributes,” Hanson said of his philosophy.

“They take a risk coming to what was a startup. And at the same time, if they create value, they should actually share in that value – whether it's through bonus, ownership or profit commission,” he said.

Expanding into other lines

After hiring a raft of new senior executives – including Berkshire Hathaway Specialty Insurance Company’s Dean LaPierre, Liberty Mutuals’ Ed O’Brien, and former AmTrust executive David Lewis – Hanson made it clear CrossCover would opportunistically look to expand into other classes.

“CrossCover was never intended to be just property,” Hanson explained, pointing to the firm’s recent hires.

“So, we're really looking to expand into other lines of business where we can use the talent that we find, and that we can attract. That's really our plan for the future, wherever that takes us,” he noted.

Hanson said that in property CrossCover would potentially look to further expand its limits, while entry into other lines of business “will be what we see and what talent is available”.

“The difference is, I would like to attract an individual who's made a lot of money for different companies, but really wasn't part of the award for that performance that they gave, and try and build from that,” he commented.

He also ruled out M&A and making acquisitions as part of the strategy, using the imminent launch of a new builder’s risk by O’Brien as an example of the type of organic growth the MGU is looking to drive.

“Like with Ed O'Brien, he's starting a builder's risk program from ground zero. We gave him the capacity; he has the capacity he needs to make that happen. So, he hits the ground running. But that's what I would envision that we would do going forward in other lines of businesses,” Hanson concluded.

Watch the full interview with CrossCover’s Scott Hanson to hear more about:

  • How the surge in cat activity fueled the MGU’s 2021 launch
  • The MGU’s strategy of writing multiple non-cat accounts for every cat account
  • The importance CrossCover places on staff sharing in its upside
  • Plans for CrossCover to diversify its platform beyond property
  • Why CrossCover doesn’t plan to consider M&A as part of its strategy
  • And more…