Rod Fox co-founded TigerRisk Partners in 2008 after spotting a gap in the reinsurance market. Just over a decade later, the company has established itself in a leadership role and a reputation for innovation.
Rod joins Matthew on Episode 116 to discuss how the company has grown, the future of the broker, and why he feel right now is the most interesting time for insurance.
Talking points include:
- Solving problems through technology
- The future of placement platforms
- Protection gap and opportunities
- Embedded insurance solutions
- Building a culture to attract talent
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Capital, culture and challenging the status quo - Episode 116 highlights
Matthew: Rod, you have spent most of your career in reinsurance, with a brief interlude in insurance as CEO of Praetorian. Why did you decide to set up TigerRisk Partners as a broker and not stay in insurance?
Rod: I love the broking business. It's fascinating. The variety of different client situations and the volatility of the market from time to time is really captivating.
Insurance is a different business. Policies are renewing throughout the year and it takes longer to make an impact at an insurance company. I love the broker business, I’ve loved Tiger and this market we're coming into is fascinating as well.
Matthew: To me, being a broker has always been about the quality of the people and the relationships. Without the right people, it’s difficult to survive in the broker world.
Rod: You nailed that. Fundamentally it’s all about the creativity and the energy and talent of the people at the company. We talk about that almost every day and that is the secret sauce. The other services and technology are all important, but it’s fundamentally about the people and what they're doing daily.
Matthew: Can you say a few words to help people understand TigerRisk and what areas you're involved with?
Rod: Back in 2007, Jim Standard and I both agreed there was a spot in the market for a high-end reinsurance broker, bringing different forms of capital to risk and a significant amount of talent. We wanted to work with larger, more sophisticated clients and big complicated transactions.
Our initial foray was significantly in the Catastrophe business, and since then we've expanded throughout North America, into London, Bermuda and Hong Kong. The product set has grown from the Cat business to a world-class capability in legacy transactions and capital market transactions, as well as specialty casualty reinsurance.
Matthew: You mentioned one of the areas you saw opportunities in was finding different capital for your clients. For people who aren't familiar with how a reinsurance broker operates, can you explain the different capital choices?
Rod: There's what I would call rated balance sheets, which would be a traditional reinsurance/insurance company or Lloyd’s. Then there was a variety of different, I would call them alternative capital offerings that were just starting. Pension funds were looking to invest either directly into insurance risk or through a manager.
We have actual securities like cat bonds and other forms of specific security. If the whole capital solution bandwidth widened from a traditional insurance or reinsurance carrier, and we felt we could still do that risk, we’ll try to find the most efficient capital.
Reinsurance is just another form of capital and we wanted to be able to bring the whole suite of options, and we do that today.
Matthew: When you talk about legacy transactions, is that taking books of business that have been run off and you still need to find reinsurance coverage for them, but they’re no longer active businesses?
Rod: Exactly. The most common example is asbestos and environmental insurance, particularly in the US but also in Europe and the UK. Companies have a block of policies they're no longer writing, but they have long-tail liabilities and it’s easier to have a professional manager run those off. It's grown significantly during our involvement and it will continue to grow.
Matthew: Anybody building a company wants to attract good people. In the early days, what was it about TigerRisk that encouraged people to move to a smaller organisation?
Rod: When we started Tiger, it was Jim, me and a couple of other people. We had some early risk-takers that wanted to join us and I couldn't figure out why others wouldn't want to do it. There were a lot of people that told us we couldn't do it, and a lot of people didn't think we could do it, but I guess I just have a higher risk appetite.
As firms become larger, they become soulless. Maybe not completely, but people are sort of an automaton working in a big machine. We spend a lot of time talking about culture, high performance, and being great at life. We don't want people just to be a reinsurance or insurance wonk, we want them to be great at life. Tiger has a real soul and people gravitate to that over time.
Matthew: Reinsurance has seen some mergers in recent years. Is it now a race for the third player? Or do you see space for boutique players coming in?
Rod: We're the third-largest intermediary and we'll continue to grow. There's room for others, no question. This is not a three-person game. There'll be start-ups and more mergers, and it’ll be fascinating to see where it goes.
We've got two huge competitors, but there is room for a different opinion and a different style. One of the things Tiger is known for is innovation. We spend a lot of time on that and we can add a lot of value to companies around the world.
Matthew: A lot of larger insurers work with multiple reinsurance brokers on different lines. It’s not all or nothing when competing for business which must help win business?
Rod: Absolutely. A large insurance company might have two, three, four, five different parties it is working with. Somebody is working on cyber, somebody is working on natural catastrophe, somebody's working on the motor business. They solicit ideas from multiple parties and decide who they want to execute.
Matthew: TigerRisk was one of the original leaders that had a placing platform of its own. Lloyd’s recently announced it's no longer going to develop its platform in-house, so what do you see as the future for platform providers?
You and I share some frustration with technology in insurance, particularly around placement platforms. There is no reason we should be operating in a circa 20th-century model with emails and things like that. This has been a 20-year crusade for me and I'm frustrated that we as an industry haven't moved faster.
With our globalREmarket platform, we finally just said, ‘we're going to build it ourselves and we're not going to wait for somebody else’. We did partner with Willis and with their merger with Aon, that's not going to work.
To your question, the industry will end up with a handful of broker systems, which doesn't make sense. This should be a multi-dealer platform, but the ability of different parties to work together has been always challenging. It will happen, but there will be this area of multiple broker systems, finally winnowing down to one or two, or maybe three.
Matthew: You've also built your successful TigerEye technology for looking at portfolios. Are you looking at investing in, or partnering on, more technology offerings?
Rod: When we first started Tiger, one of our largest clients said their broker, a top-two global firm, had sent all of their cat modelling analysis in a FedEx box in a notebook, and they had no idea what it meant.
We were building TigerEye, our portfolio modelling tool, and so they became a TigerEye user. Tiger Eye will continue to grow and yes, we would like to have other technology offerings available to third parties.
Matthew: Intangible assets are a big theme just now. Is that an area with opportunities for you to expand?
Rod: We're expanding significantly into different specialties, whether it's liability broadly or different subsets of liability. There's an opportunity for more insurance in all sorts of areas. I was talking to somebody who is a non-insurance person and they were fascinated with insurance as a technology opportunity. It is a lubricant for the global economy.
People have talked for years about the protection gap and it's becoming bigger. Whether it's weather derivatives or climate change and its effect on different businesses. That's going to be huge and innovation around insurance is a huge opportunity.
The ability to embed insurance products into everyday things is going to be part of the future as well. Why do we have to buy automobile insurance separately? What if it just comes with the car? I was talking with somebody the other day that was selling an embedded climate product with seed. When the farmer bought a certain amount, embedded in it was a weather derivative in case it rained too much, or it was too hot. They almost had a warranty on the seed built into the price. That's the way the world will go and we’re going to see insurance continue to expand.
Matthew: The opportunities are there, but what are the barriers stopping faster change at scale?
Rod: It's almost a little bit of inertia. We've talked about it as an industry and haven't devoted the talent to the problems. The insurance industry is extremely busy. Whether it's Covid, a hardening market, new players, there's not enough attention being devoted to it. As we go forward, there will be because it's a global situation. We’re going to see an increased demand for weather products, and there's going to be a lot of interesting developments.
Matthew: You said recently that we are in the most interesting marketplace of your lifetime...
Rod: Business interruption, social unrest, social inflation, low interest rates and natural catastrophes have created chaos around the business. Stack on top of that the consolidation of two of the largest insurance distributors in the world. It has just created this incredible market opportunity.
It's everything going on, plus Covid, plus consolidation. Clients need solutions, they need innovation. There's stress on the system, there's a need for new capital, there's a talent situation. Everywhere we look there's opportunity.
Matthew: You touched on the hardening market (= increasing rates) earlier. Are you seeing less interest from your clients in innovation - are they just focusing on the core business now?
Rod: The market forces people back toward simplicity and the straightest path, but it will drive innovation. Short term, everybody's head down getting things done, But it will create a draft of innovation that sweeps through and hopefully we'll have all sorts of new ideas, technologies, products, etc, to help this market going forward.
Matthew: What sort of possibilities does the investment you received from Flexpoint Ford open up?
Rod: We have substantially self-financed Tiger from the get-go. To go to the next level, we needed a financial partner. We started this process at the end of last year, and it was all coming to a head just as Covid came crashing in. We thought that having a financial partner going through this incredible market would be very beneficial, so we pulled the trigger.
What it's done is give us more financial horsepower, in terms of hiring people, expanding our product capability, expanding technology. It's been great and we're excited about it.
Matthew: Someone in your position has to deal with clients, run the business, and keep on top of what's going on in the world. What tips or suggestions can you share for absorbing information as well as doing a day job?
Rod: I don't have any great secret life hack; I just try to absorb as much as I can from everybody I can. I'm involved with the Navy SEAL Foundation here in the US and we had a call last night after a hostage raid to rescue an American in Niger. The leader of the mission talked about the keys to success and he could have been talking about Google or Tiger or Goldman Sachs or something else. It was highly trained operators, extreme discipline, a narrow window, zero acceptance of failure, etc.
The moral of the story is I'm always learning from everybody and I try to stay out of the bubble in the insurance business. I'm learning about other people's businesses, whether it's technology or something else. Don't get caught up in yourself and make lots of room to grow personally and professionally every day.
Continuing Professional Development - Learning Objectives
InsTech London is accredited by The Chartered Insurance Institute (CII). By listening to an InsTech London podcast, or reading the accompanying transcript, you can claim up to 0.5 CPD hours towards the CII member CPD scheme.
- Claim 0.5 hours for listening to Episode 116 of the InsTech London Podcast