Costero Brokers is a Lloyd’s (re)insurance broker founded in 2017. Ali Smedley caught up with Managing Director Jamie Webb and Divisional Director James Gadbury to discuss Costero Brokers’ involvement in crypto insurance, how the company works with MGAs and its new coverholder arm, Elysium.
Jamie and James, what are your roles at Costero Brokers?
JW: As Managing Director, my role involves managing and running the company. My speciality has always been within property and casualty (P&C) binding authorities and the reinsurance market, but at Costero I am increasingly involved in the emerging risk space.
JG: I am Divisional Director at Costero. I run the binders and programs division which predominantly covers coverholder and MGA business, focused on the US, Australia and New Zealand. This covers more traditional lines of business but increasingly emerging classes of business too.
What is the history of Costero Brokers?
JW: The company was founded in 2017 and originally focused on property and professional indemnity open-market risks. Before Costero, James and I worked at Prospect Insurance Brokers which was a traditional family-owned Lloyd’s broker; I founded it with my father in 2010. Through working with innovative coverholders, Prospect specialised in a range of interesting and fast-growing lines of business. For example, in 2010 we placed a large cyber and tech binder, created an Ebola business interruption product in 2014 and more recently moved into drone insurance. In 2020 Costero acquired Prospect and in 2021 it also acquired Mar Risk, a marine and energy broker. The present-day Costero is a combination of these businesses.
What risks does Costero Brokers specialise in?
JW: We have specialist teams for US property, political violence and terrorism, and marine and energy. We also have a UK division, an alternative risk transfer team and the binders and programs team which James runs.
JG: Within the binders and programs team we focus on a few key areas. The first is traditional binding authority business, which includes accident and health, property, cyber and general liability. We also work within the emerging risk space, developing new insurance products or new areas of risk which covers areas including cryptocurrency and parametric insurance. Lastly, we work with MGAs that are using technology to improve the products they are selling, whether that be within underwriting, risk management or the customer experience. This can include utilising telematics data or machine learning.
How does Costero Brokers work with MGAs?
JW: As an independent broker we want to provide greater value to our clients than just placing their business. Costero Brokers acts more like a business consultant as we offer advice on pricing, how to structure products and how to distribute these products. We also help with finding underwriting staff and making introductions to capital providers.
JG: Costero works with a range of MGAs, from those that are ready to go to market and just need to find capacity to early-stage start-ups that only have a seed of an idea. We work with them to help develop their idea further, act as a sounding board and introduce them to capacity providers.
What work does Costero Brokers do within crypto?
JG: Our involvement with crypto began with our work to help Coincover, which provides ongoing risk management and wallet monitoring services to retail and institutional clients. Costero helped develop an insurance product to protect customers in the event that Coincover’s technology does not work. The policy began three years ago with a cover limit of £100,000 and now covers up to £1 million in any given wallet. This experience gave rise to a range of other crypto-related opportunities which we are now involved in.
What trends are you currently seeing in the crypto insurance space?
JG: The biggest crypto news at the moment is the collapse of FTX, which was the third-largest cryptocurrency exchange by volume of transactions. We are still waiting to see how that will impact the insurance market in terms of losses. I think the event will reduce the capacity available in the market; insurers considering covering crypto risks are likely to be more cautious now. One positive from the crash of the exchange may be that it speeds up the regulatory environment for crypto and digital assets, which in the future should make it easier for insurers to provide capacity.
The NFT market has also changed a lot over the past year. Originally it was seen as a new potential art market, but many high-valued pieces have quickly become worth very little. For example, earlier this year Justin Bieber bought an NFT for $1.29 million, valued last month at $69k. I am now seeing the NFT space move more towards collectibles and rare editions of items, where the NFT can act as a validator for these unique items.
What other trends are you observing at Costero Brokers?
JW: At Costero we are seeing a growing interest in parametric insurance from clients. Over the last year, pricing for parametric cover has become a lot more competitive compared to traditional indemnity-based insurance. Its growth will continue, but the parametric insurance market is still constrained by the limited capacity available.
JG: We are also seeing a shift in how start-up MGAs think about their growth strategy. There used to be a focus on the size of their portfolio rather than its profitability, but that is changing. In the past these companies also tended to distribute directly to customers, whereas now they are more open to utilising brokers for distribution.
Costero Brokers launched Elysium Insure in August 2022 - what is it?
JW: Elysium Insure is the MGA entity within the Costero Brokers brand. It offers coverage to protect international healthcare companies and medical practitioners from claims of negligence. The MGA model is an area of business that we are looking to expand. We intend to do this by hiring more specialist underwriters that operate within certain niches.
Why has Costero Brokers joined InsTech as a corporate member?
JW: InsTech has a strong network of impressive entrepreneurial individuals looking to embrace new technology, which we love being part of. Costero is also still a relatively new broker, so InsTech is great for helping us further engage with the insurance community.
What type of companies are you looking to connect with?
JW: Costero is keen to meet new or existing MGAs looking to find capacity, expand the classes of business they already offer or want to expand into new geographies where they do not already have a strong network. We would also like to meet insurers that are looking for reinsurance.
What should readers do if they want to learn more?
JG: Please reach out to us via firstname.lastname@example.org or email@example.com. We’d be more than happy to have a call about how we could potentially work together or even just discuss innovation within the market.