Reinsurance across the pond: a three-month view

Authored by Liberty Mutual Re Underwriting Assistant Charlotte Corbett

In April, I was fortunate enough to embark on a transatlantic secondment to work with LM Re in New York for three months. What did I learn? Well, J-walking is, in fact, illegal, sales tax is not included in prices and therefore 99-cent pizza is rather outrageously, not 99 cents.

What about reinsurance, you ask? Well, it’s safe to say my oversized Starbucks coffee was certainly needed as I delved into the fast-paced US reinsurance market. Stepping into the multifaceted world of reinsurance underwriting for Property and Casualty in the US, I've gained unique insights into the industry while comparing the distinct approaches between the US and London markets. This blog explores the nuances of my US experience and highlights the value it has added to me both in the workplace and personally.

Lloyd’s of London vs New York: The Hubs of Reinsurance

Operating in Lloyd's of London in the UK versus the US reinsurance market presents a nuanced contrast that distinctly shapes the reinsurance landscape and underwriting practices. As I walked into our office on my first day, ready to take on the world, I was in genuine disbelief. Where is your marketplace? What do you mean I can’t just pop out to get a coffee with a broker?

After becoming accustomed to my new surroundings, I learnt that the reinsurance landscape in the United States is more decentralized due to its vast size and diverse regulatory framework. Instead of all reinsurers being within the same square mile, different “hubs” exist across the US, creating a range of knowledge and expertise. Aside from the New York “hub”, I was also able to spend time in our Liberty Mutual Headquarters in Boston. Working in these two hubs alone, I saw the American market’s adaptability and innovation. The distance between clients, brokers, and underwriters does not inhibit but, rather, allows for the necessary innovation that forms the market’s response to the different landscape of evolving risks, technological advancements, and changing regulatory environments. By being more geographically dispersed, I found that reinsurers could tap into localised expertise that aligns with the diverse risk landscape across the regions.

By contrast, Lloyd’s of London embodies tradition. As a physical marketplace, Lloyd’s of London facilitates face-to-face interactions between brokers and underwriters, allowing constant communication and collaboration. While both environments are different, they achieve the same goal, to provide solutions for our clients that fit their requirements. Operating in both environments has underscored the importance of tailoring underwriting solutions to the specific characteristics of each market while embracing a global perspective that transcends geographical boundaries.

Regulation: USA vs London

A central aspect of reinsurance underwriting lies in navigating complex regulatory frameworks. Although risk assessment and pricing are similar, there are notable differences in their practices and regulations. In London, there is a centralised regulatory approach as we operate under entities such as the FCA. On the other hand, the US reinsurance market is subject to state-based regulations, resulting in a more de-centralised approach. As each state has its own insurance department that controls reinsurance activities, this adds a layer of complexity with varying regulations across jurisdictions. It was a great experience working with the LM Re team in Stamford as they taught me to navigate these differences and tailor underwriting solutions to adhere to these regulatory requirements.

Risk Mosaics: USA and London

Underwriting inherently revolves around understanding and mitigating risks. Immersing myself in both the US and London underwriting teams has highlighted the divergence in risk profiles.

The US market, with its expansive geography and diversity of perils, necessitates a multifaceted risk assessment approach. From hurricanes along the Atlantic and Gulf coasts to tornadoes in the Midwest, earthquakes along the West Coast, and wildfires, the US really has it all. In fact, in the three months I resided in New York, I experienced all sorts of extreme weather, including the impact of the Canadian wildfires creating an air quality index of over 200…

Before the Canadian Wildfires

During the Canadian Wildfires

In addition to this, the concept of social inflation has created an unprecedented escalation in claims and settlements across the US. Each state’s variability arises from differences in state laws, court precedents, and cultural norms. Thus, the legal climate and court decisions in each state can influence the jury, creating a wide range of liability award outcomes across the US. The Casualty team’s insights proved invaluable in navigating the complexities of the legal and societal dynamics that shape damage rewards across different states.

This first-hand experience of underwriting both Casualty and Property US risks has taught me more about the specific challenges posed by each peril. This holistic approach has reinforced the importance of adaptability and creativity when navigating the diverse world of reinsurance underwriting.

Lessons learnt

My secondment to New York with LM Re has been a transformative chapter in my career journey. Working with our amazing team across continents has honed my adaptability, deepened my understanding of reinsurance underwriting, and equipped me with a new perspective. As I merge the best of both the American and London approaches, I am poised to use my experiences in the ever-evolving world of reinsurance underwriting.