Ep324 Richard Clapham DUAL: We're now at the next Chapter

0:02I'm Mark Gagan and you're listening to the Voice of Insurance podcast, produced in association with Sapiens, Sapiens' autonomous insurance platform, AI built for the complexity of specialty insurance. Today's guest is an incredibly well-rounded professional with over 40 years experience in our sector as both a broker and an underwriter, but also as an entrepreneur and capital raiser. He's even spent time being responsible for compliance. Richard Clapham has spent the last decade in the ultimate market convening role, running global MGA, Duel. Closing in on 30 years in operation, Duel is the godfather of the now burgeoning MGA movement, and part of this interview is effectively a grand tour around the enduring and evolving advantages of the MGA model.

0:49In our discussion, Richard recounts the progression at Duel to date and the completion and optimisation of its genuinely global underwriting network. Then we move into the group's ambitious growth plans as it looks to lever its worldwide operating platform in phase two of its development. On the way, no question is left unanswered and no topic is left unexamined. Richard is great company and this was a comprehensive and satisfying interview that I can highly recommend. Enjoy the podcast. Richard, welcome back to The Voice of Insurance.

1:20Richard Clapham: Thank you. It's really good to be here. The last time we were in Madrid, I would still rather be in Madrid than London. I think certainly so, with the winter coming in now. Also, we were looking for a party in Madrid. It's usually better than a party in London. Maybe I'm biased, but in Madrid, they do do parties better. And that was on the occasion of your 25th anniversary. Obviously, a very special day for Jule, being its 25th anniversary. I mean, we were the first MGA ever in Spain. And we recounted that story that day of how Jule came into being. I think it was license number 00001. That was the one, yes.

1:52Because the legal concept of an MGA in Spain hadn't ever quite existed because of the brokers, intermediaries, and there had always been tied agents. If you go to any Spanish town, you can see the Mapfre tied agent, the Generale one and the Zurich one, and the Allianz one on the sides of all the buildings as you go into any town in Spain. But they're tied agents. They weren't underwriting on behalf of more than one company. So yeah, the thing never existed.

2:14Richard Clapham: I mean, it didn't take long to fix it. No, but I think actually what's interesting, looking all the way back from 1998 to today, actually how long it's really taken for MGA's to get established in Europe. I'm sure we'll talk more about that. Yeah, there's still a huge amount of green field there, isn't there? Oh, over the last two to three years, I think MGA's in Europe have really come of age. And I think the interest in those who can create MGA's now in Europe is a focus for a lot of carriers. I mean, how do you get entrance into Europe? because I actually had William Pitt of FaZe on the show around the turn of last year.

2:47It was really interesting. And obviously, it's been more of a concerted effort. There have been pan-European conferences, all sorts of things now, pan-European MGA Association, which is what William's running. Well, we'll get onto that a bit later. Something that I do now in the podcast, which I didn't used to do, because I suppose I was just young and I just wanted to get straight to the questions. I was too excited. I forget to ask people to introduce themselves to the audience. and first answer the question how they got into insurance this is a good one to start and then run us through their career up to date and so if you can do that that would be really

3:20Richard Clapham: helpful for anyone who doesn't know you I think it's always interesting because a lot of people particularly in London say they fell into insurance and I've actually got my real life falling into insurance story I think a lot of people know I'm quite a keen equestrian and I I had a riding accident where a horse decided to squash me a little bit. And I had some time off. And I was sitting at home as a 19-year-old and wondering what to do. And I thought, well, I'll just look in the paper and see if there's something I can do. And I found this advert and applied to work in trade indemnity up in Old Street.

3:56Richard Clapham: Is that something that ended up in QBE? Credit insurance. Yes. It was the leading credit market at that time. I went on the management trainee course. But, you know, I can identify a lot of people go on those courses. You always want your career to progress quicker. And it wasn't going as quick. And they said, you have to go through all the steps of the course. So I was then introduced to somebody in Lloyd's who was looking for a trainee broker, which is where I started my broking career with a small reinsurance broker called DR Fleet. And actually, my broking career spanned 13 years. DR Fleet were bought by Bain Hogg and Bain Hogg interned by Aon.

4:32Richard Clapham: So I ended up doing a very short period of time in Aon. It was around 1998, so right? 97. 97. And then one of our largest clients approached me and said, would I like to go and be their reinsurance manager around there, which was sort of a change of career and to go away from the broking side and across into the underwriting side and then worked for Reg Brown for that period of time and eventually became deputy underwriter around there as well. They in turn were acquired by Terranova and then Terranova by Markel. So ended up having some years with Markel. And, you know, I think all of us have it in us at some stage, we want to go and set up our own thing.

5:07Richard Clapham: And I joined a group of four and we went and set up PRI, which at that stage, which was in 2002. And it was a time of a very soft market, just about significantly hardened. And it was a soft market where capital was in really short supply. So when we generated something quite unique, we generated 100 million pounds on aim to set up our capital for this vehicle. I can't remember it. But I had a hiatus in between being an insurance broker and a reinsurance broker. And then it was during that hiatus. So maybe I missed it. I came back to the market as a journalist in 2005. So I had five years off.

5:41So you definitely missed that period. What does it stand for? Professional risk insurance. Right. OK. And then so by 2005, was it something else by then?

5:49Richard Clapham: So we traded for a period of 12 months before we were in turn bought by Brit. That's why. OK. And then a key part of setting that up was getting the regulatory permissions to set up a UK insurance company. So I then went and joined Catlin in 2003, joining on their underwriting board, but also to set up Catlin UK for them as well. There was a period, wasn't there, when lawyers' platforms of a certain scale were probably nearly all setting up a company platform as well, weren't they? I remember writing about that quite a lot. I think it ebbs and flows. And I think that was very much a period where the value of having the dual platform was probably at its infancy.

6:30Richard Clapham: I think it grew a lot. And then obviously it ebbed away a little bit from Lloyd's. But when we look at the interest in the market now and the number of major global organizations that are now coming into Lloyd's. I mean, everyone's got both now, haven't they? Yeah. I think it's a key part of having a diverse capital base. And so how do make the leap to here? No, so I left XL Catlin in 2016 at the time. Howden were looking for a UK CEO and I joined in September 2016 as UK and European CEO at that stage and then at the end of that year also took on the role of group CEO, which I've held since. You've done almost everything then, haven't you?

7:13You've been underwriting, been a broker, you've managed underwriting, You've managed to re-insurance relationships. You worked in almost every part of the insurance value chain, haven't you?

7:22Richard Clapham: I think the interesting one that sort of, some people sometimes turn and say, where did your interest or knowledge base around compliance and bits like that come from? I was actually, in my broking days, also compliance officer alongside the broking piece. Of course, because you've raised capital as well. And raised capital. And then also, with the new conduct regulations coming in into the UK in about 2004 or 2005, I led from a Catlin perspective, setting up our whole conduct piece and how that's evolved over the years. There was a lot of work. And of course, in parallel with that, the rating agencies were all far more interested in sort of how businesses were organized and how they managed their risk organizationally as well.

8:01What was that called, ERM? And that came to the fore as well, didn't it?

8:04Richard Clapham: Yeah, and I think with the Solvency II regime coming in, I mean, I found that really interesting. And I think it gave you a lot of knowledge because being able to understand capital and all its component parts, I think really when you come to look at how you can improve returns for your carrier partners and all the rest of it and look at efficiency and what can be driven, I think is an absolute key part. And I've always found capital models fascinating. I found that fascinating at the time because I think, well, I thought a pound in your pocket is a pound in your pocket. but not according to the regulator, that some of these pounds were core important pounds, and some of these ones were given a bit of a haircut and only deemed to be worth about 75p or whatever for regulatory purposes.

8:45And others maybe were sort of, you know, maybe some of the other pounds were worth more than a pound, which was interesting because it's an interesting philosophical question, isn't it? So there's still a pound.

8:54Richard Clapham: Yeah, I could certainly understand why you needed more pounds, as you say, for cat. But the one that I was always curious about was the low level of capital you needed for motor. Yeah, yeah. I mean, it was a great diversifying play in your overall portfolio. Well, I suppose, was it Geoffrey Howe, or was it Nigel Lawson? Anyway, I'll put this in the notes. I'll correct myself and put it in the notes. Famous Conservative Chancellor of Exchequer under Margaret Thatcher in the 80s being harangued about the size of the deficit. And he said, well, you know, it really is actually just a small difference between two very large numbers.

9:27So for motor, you've got a very large number. And, you know, one of the numbers is going to be the claims and one of the numbers going with the premiums, it should be only a small difference between the two, as long as you've bought enough reinsurance for a Thames flood or something. And obviously, Kat's got a lot of charge apiece.

9:40Richard Clapham: But it was always interesting, I found, what you could write into the portfolio and the changes it made on that capital piece and on the return you therefore got. Well, diversification is what it's all about. Right, pull it back towards dual. So obviously, it was 10 years ago when you specifically took charge of dual. In the UK, 2016. 2016. 16. So when we last spoke three and a half years ago, Duel was on about$3 billion in gross written premium, and you had a target to hit$5 billion. I can't remember what time period you set yourself for that. But anyway, where are we now? So I think we're getting up towards the$4 billion.

10:17Richard Clapham: I think the time scale, I think, at that stage was 2028. Where I think we're now looking, we have our 2030 plan as part of the overall group. And effectively, over the next four and a half years, I think we're looking to double again from where we are today. I'm sorry, what was the number? Doubling two six. Doubling two six. We're sitting about 3.6 at the moment. Yep. Okay. So you haven't grown particularly fast since we last spoke, really? I think we've done a fair bit of key restructuring. I think a real key differentiator for Jewel has been around creating the global platform. Because I think that is one of our uniquenesses.

10:55Richard Clapham: And it's interesting, if you looked at the top 10 global MGAs, eight are headquartered in the US. One is headquartered in the UK, and there's no guesses who that is. And one is in Bermuda. And I think the key to that is probably we've got the most extensive international network. And what that in turn tells you is where our probably biggest opportunity to really grow and develop dual out is in the US, because it's probably where we are compared to our overall size, most underdeveloped. So it's really about been putting all the building blocks in place and then setting ourselves up to really grow from there across all the five regions we're now in.

11:37Would it be right to say, I wouldn't dare to list the amount of offices you've got around the world because you have a huge number. Would it be right to say that now, 28 and a half years into this project, that the dual global network is pretty much built?

11:51Richard Clapham: So I think we're currently in 21 countries across five regions. And our biggest growth over the last two, three years, and we referenced the beginning, was around Europe because I think MGAs are really coming of age in Europe. obviously we're starting to build our presence in latam now but actually probably for jewel right now with the biggest opportunity over the next five years is really to grow out that u.s platform i mean the u.s market is the largest mga market in the world it's a large insurance market in the world i think the potential we've got there has probably been very underdeveloped over our first 28 years so would you say which ones you think you're going to get the most of that extra 2.4 billion you need in the next few years to hit your target.

12:38Most of that's going to come from number one out of that will be US, then Europe, and then maybe Latam.

12:43Richard Clapham: No, I think UK. I mean, obviously, a key part of our strategy, particularly with Simon McGinn coming and joining, was to grow out our commercial retail regionally. And obviously, you need to put significant infrastructure in behind that. So he's spent the last 18 months building that, And we're just really set now to turn around and significantly develop that. Also, we have now a very strong UK personal retail presence with KGM as well. So I think when you put that all together, I can see the UK certainly growing as fast as, if not fast, in Europe. I mean, Europe for us has been our biggest growth over the last two to three years.

13:24Richard Clapham: And that was significant investment. And I think you'll recall going back to the setting up in Spain. We started off as a financial lines MGA, and that pretty well was where Juul was in its first 10 years. I think probably what we could have been quicker at, having built the platform, was actually to diversify the product range across it. And really, the success in Europe has been about taking that financial lines base and distribution and really expanding that and the product range across it. Excellent. So you've got a sort of operational leverage can start to kick in. You've got your 21 platforms and you can add new lines to places where you already are, new expertise, obviously things where you've got expertise in most part of the world and you can start to cross-pollinate that over to another part of the world.

14:12And presumably, do you think there's a faster opportunity to grow now because you're operationally set?

14:17Richard Clapham: I think that's absolutely key because what takes the time and effort is building the infrastructure, I mean, more from a Reagan governance point of view, takes a long time to set up some of the companies that you need to be able to trade in each of these countries. And we've now got that in place and all the plumbing and infrastructure around that. So adding product is actually relatively easy. What's less easy, but an absolutely critical part of our proposition is talent. I mean, at the end of the day, you need to get the best talent in to turn around and be able to drive those products. but I think in encouraging talent in over 28 years we built up 12 ,000 brokers so if you come into Joule you've got an ability to trade across 12 ,000 brokers yes well we must talk about that because of course yes when you had serial number 0001 then that does imply that there wasn't any competition that was only in Spanish market obviously and only in financial lines at that time of course we know since then there's been an explosion of a whole ecosystem that didn't really exist before.

15:21Any talented underwriter anywhere with a following with some particular specialist product knowledge could not necessarily say they should, but they could. There is a whole ecosystem of incubators and small venture capitalists and other people with hybrid carriers and who will say, come in, here's a desk in my office, here's a license, here's some paper, we're backing you. But of course, what they haven't got, they might have five brokers to trade with, but they haven't got 12 ,000. So the question I want to ask is, what's your pitch to that talent? Because we know that there's a kind of siren call now that this is now a new career path that perhaps didn't exist to the same extent for any talented underwriter who's ambitious, who wants to work for themselves, because not everybody does, who wants to eat some of their own cooking, shall we say, has got this huge plethora of choice that they didn't have before.

16:12And Jule's there, you're waving your flag saying, come over to Jule. You've got the platform, you've got a global platform, you've got great relationships already. Is that the pitch?

16:21Richard Clapham: I think we'll come back to the pitch second, but I think the real key starting point, I think, is if you look at the presence of MGAs in the market now and the part they play, and actually more people wanting to come in and building the size of market that's occupied by MGAs is absolutely key. Because I think the fundamental change probably over the last 10 years is there was slight feeling that MGA is maybe a possible dangerous place to go and work. There's a bit of a risk attached to it because of longevity and all the other bits and pieces. I think the MGA is now, and you look at the size of, we were talking about the top 10, those top 10 MGA's are bigger in a lot of cases than the carrier partners who support them.

17:05Richard Clapham: And the reality is, I think a key starting point is the stability of MGA's is well proven out. So for an underwriter to look at going into the MGA world, that sort of risk factor, I think, has been removed. So it then comes around, what options do I have and what am I going to turn around and be able to achieve? And I think one of the hardest parts, particularly from a London market underwriter perspective, one of the hardest parts is actually building distribution. And I think a critical part for any underwriter in any MGA in the world is, how am I going to build that distribution? So obviously, we are going to major on the fact that we've already got a ready-built distribution there.

17:43Richard Clapham: a key part that sits underneath that is the platform on which you're going to be able to underwrite off i mean i'm sure we'll talk more about technology in a minute or something else but the reality is when you've got everything ready that you can come into which is all housekeeping stuff that is all set up but set up on a global basis and the reach of mga's i mean traditionally a lot of them were just single country single product yeah but now you've got the ability to be an MGA that is multi-country, multi-product. So your relevance in that market is so much stronger. So I think the way Juul is positioned, our relevance in those markets, our distribution, the technology we have to play, and ultimately the accountability and responsibility we give to under-is who come in.

18:31Richard Clapham: I mean, we're coming to bring them in for their talent. That's what we want to do. It's for us to turn around and help them achieve what they want to drive and deliver. Yes, it's the kind of best of both worlds pitch, isn't it? Then, you know, if you went and did something on your own, you could, obviously plenty of people are going to help you do that. We've already got this global distribution. So one, we're not going anywhere, 28 and a half years, another 28 and a half years time, you know, 57 years, we'll still be here. We could say that with a lot of certainty now, that, you know, you're not going to have a couple of bad years and then lose paper and whatever, and then you will be able to find the capital to back you because you've got a 28 and a half year track record of profitability.

19:09Richard Clapham: And our pitch to our carrier partners is about building long-term sustainable growth on a profitable basis. And that long-term piece, I think, is another key differentiator we have because being part of the Cowden Group, we're not for sale. We're not getting ourselves ready for sale in five years' time. So our whole investment and strategy is looking to that long-term growth, which again, gives a lot of comfort to your carrier partners that you're not going to be sold out underneath their feet. But another key part, ultimately, an MGA is only as good as the capacity it's got. That is your lifeblood.

19:46Richard Clapham: And I think if I look at the size and scale that Juul has, and the overall relationships we have across the wider Howden group, our ability to attract capacity and the speed at which we can attract it is another key part. If you're looking to go into an MGA, how quickly and how available is the capacity it's going to allow me to start doing what I want to do, which is underwrite. It seems like, yes, it's a slightly safer option. There are always going to be people who just say, no, I really just want my name above the door. I just want to do my own thing. Fine. But this sort of suits someone who's perhaps got a slightly different vision, who wants to join up to something.

20:21And of course, they'll get the rewards for something that they've created, I'm sure, that they'll construct their own incentives so that they treat it almost as if it was their own business anyway, I presume.

20:30Richard Clapham: I mean, right across Sir Howden Group, David talks about the owner's mindset, and that is as prevalent in Juul as it is anywhere else in the group. And actually having our employees being shareholders is absolutely key in that overall entrepreneurial culture that's grown across both broking and underwriting. Do you think tech is another advantage? You can say, because we're big, we've got the scale. AI is something I'm asking everyone about. And presumably, you can pitch again another part of the pitchers you can say, well, we can make those investments in the AI that you can get the benefit of all that research that we've already done.

21:04Again, to make your business as AI native as it needs to be, you can get all those efficiency gains and other things. Is AI actually eroding that advantage? Obviously, it's always been the advantage for the larger players. The history of technological change in the insurance market has always been that perhaps, for example, the larger brokers might really like it because they might see it as a barrier to entry for the smaller brokers. I don't think technology is like that anymore. It's more of an enabler for everybody. It's more democratic than it used to be because the costs are so much lower.

21:32Again, but is that part of the pitch to say, look, we've done the AI, we can plug into our AI platform, you're going to have a very, very smart assistant and agents looking at all your book and suggesting new ways of attacking this problem, etc. Is that another part of what you do?

21:47Richard Clapham: I mean, I think where we're already deploying AI in the underwriting process at the very beginning and across it in ingestion and then into tools and the predictive analytic tools. They can plug it in straight away. Yeah, I mean, I think it is transformational and everybody will say they're doing it. But the reality is, I think it's the speed at which it has been done. And you say, I mean, can you say AI is not free? No, you have to pay for the credits. So the reality is, it's how much people are prepared to invest in it and at what speed. And I see this as being, from an MGA perspective, probably one of the most transformational moments for what has been a very inefficient, duplicative market that struggles to move data in a consistent format from one to another.

22:38Richard Clapham: I mean, there is so much that can now be done that removes a whole lot of process. Taking aside what we just talked about on the underwriting side, but the whole process piece and data transfer that sits behind it, I think, is just going to completely change. And I mean, my pet and people have heard me say it many times. I said, the one thing I'd really like to see in my career is no Baudreau's in MGAs. How far have you managed to get in banishing the Baudreau? Because there shouldn't be any reason to have one, because ideally, any of your capacity providers at some point in the future, or hopefully in the near future, or maybe even in the present, in some platforms, I'm sure they should be able to look through at whatever they want to look at.

23:20And they can create their own board row whenever they want. Seeing live, what has your underwriter done on their behalf?

23:25Richard Clapham: You know, ultimately, as a group, we like to drive change. And working collectively with a number of partners and indeed other MGAs, if we can turn around and bring that collective knowledge together and use AI to remove something that all of us agree has got limited to no value, but it's a key control in over the years how you've controlled delegated. I mean, I think the work that some of us are doing is really on behalf of the market as much as for ourselves. because I think for the good of the market, these things really need to check. We can't keep on going in the inefficient way that we have done because there are a lot of people moving a lot of data that bluntly, when you really challenge everybody's receiving it, are they using it?

24:08Richard Clapham: Are they doing it? No, but it's part of the governance process. You have to do it, and it's part of a key control. You prove you can do that every month and all the rest of it. But, you know, we've just built on that. We've never questioned whether actually we need it. Of course, if you are a paper provider, That's the whole point. Why did I give you the pen in the first place? Because I think you know what you're doing. I just want you to send me a check every quarter with all my profits. Thank you very much. Minus your commission. You know, I'm happy. Why would I have to be looking at and second guessing something when you're the expert at that point?

24:37Richard Clapham: But of course, you should be able to interrogate anything if you want to. But I think there's a directly been bit of a fear factor about us sharing in real time our data, because are you giving away your secrets and all the other bits and pieces? Now, if your relationship is in the right place and where you are partnering with your partner carriers, MJ's, and it goes back, we talked earlier about capital models and all the rest of it. And I think it's always an area I get into, which is, you know, we're a complementary part about building an efficient model for our carrier partners. Being in the same line of business is actually an advantage because we're accessing areas of business they don't get, which therefore means that overall, when you put the whole portfolio together, it's more efficient from a cost point of view.

25:22Richard Clapham: It's more efficient from a capital point of view. And we're filling in those bits. I mean, for a lot of our partners who can be leading in the lines of business we're in, we're accessing other parts of portfolio that either for cost reasons they can't get at or they actually know we're better at marketing to get that business. But, you know, you form that complementary partnership. Ultimately, being able to share that data in real time, I think, actually enables us to do more. And it just proves to them how complementary the thing is. The more that chief underwriting officer can see and the chief risk officer can see that this is massively complimentary and that chief financial officer can say, wow, this is really good.

26:02This is actually not capital intensive at all. In fact, this isn't, you know, we've almost had a free hit on some of this stuff. Again, the more transparent we can be, the better. Absolutely. And when do you think we're going to get there?

26:13Richard Clapham: So I think there's a number of interest projects that I know others are doing as well, which is partnering up with some of their carriers and chucking away what I call the process book, which says ultimately what you want from us is this data. Let's ignore the process we've had for the last 50 years to turn around and get it to you. And we're going to get it to you in a structured way that is different. But, you know, I think sometimes change management, you know, is difficult. And my fear was going to be that AI was going to just make an inefficient process quicker and more efficient. The reality is we need a complete change of mindset as to what we need, where do we need it, and who needs it.

26:51Richard Clapham: And then how quickly can we get it to them? The more I talk about the technology people about AI, the more they're talking about, well, we spent a lot of time talking about big data, but it really is. It is big data. And it's what they were talking about 15, 20 years ago. And it's finally coming to fruition. It looks like we don't need the process. All we need is I'll give you access to this massive lake of data that I've got, obviously within the protocols and the parameters of the data that you're actually allowed to see and not the data that you're not allowed to see. And that's about it. And they should be able to suck out whichever bits they want.

27:21and they've got their net in your lake of data and they should be allowed to fish in the pond as much as they want and do whatever they want with it. But in the end, there won't be a process necessarily. They'll just be able to see what you see. They're allowed to see the bits that are pertinent to them and not pertinent to somebody else. Again, so we might not even have a process. They can do what they want with it effectively because that knowledge will be there. They can just then pull down the bit that they actually want to know. I mean, completely utopian there. We won't be talking. We'll be just telepathically communicating by this stage, maybe.

27:54Richard Clapham: But, you know, the value of an NGA is what it's able to do and underwrite with that data. Now, of course, very happy to share it. But actually, you've got to ask yourself is, if I've got all that being done for me, do I actually need all – and this is part of the question. Do I need everything that I've got? Just now all of a sudden because you can have everything – Just because it was a line on the boardroom. Do I ever need that one? Do I ever look at it? Do I need everything or don't I need everything? I mean, it's almost take what you need and don't take what you don't need. But the reality is, I just think the ability that we're going to have going forward to analyze out data, we could just never get to.

28:28Richard Clapham: I mean, part of controlling submission flows and things like that was going, well, I'm going to decline 50 % because I've only got enough time to get at 50 and all the rest of it. And we had these assumptions of why we use those criteria to select the 50 we were going to quote. You know, the reality now, you can pull the 100 and start challenging yourself as to whether your assumptions were right on the 50s i suppose if you have an agent you don't have to triage anything because you don't have to prioritize things because you're going to have enough time to do everything because some of them automatically and then the human will be doing the 10 bits that are really that don't compute necessarily it's we won't need to triage perhaps because we'll be able to do everything so quickly we'll have time to really take the time that we need and we won't have to prioritize the time quite so much i mean the interesting one when i reflect back is and we talked earlier about when I joined the industry.

29:14Richard Clapham: So my first job, my first week was working in a microfiche department. My boys asked me, what's a microfiche? So you talk about where those things come. But the reason I'm going back to that was around that same time, Lloyd's was introducing EPS. And look how long it's taken to get electronic placement from those EPS terminals we all had to have to where it is today. Now, I think the fundamental difference this time is the speed at which things are now going to move is going to be so much quicker than we've seen in the previous 40 years. Yeah, once we've accepted the principle. Yeah, that's what we've got to turn around and embrace and really move on.

29:53Right, I'm going to have to dial it all back a bit. During, say, this last three and a half years, a lot of other MGA groups have appeared, but relatively more young than you have grown incredibly fast. Do you think, with hindsight, that you could have gone faster. I'm particularly thinking of the hybrid carrier sort of MGAs, MGA groups. Do you think with eyes that you could have started on a march on them in some way? It was something very different happening there or something that you don't like that you wouldn't want to do it that way in the first place?

30:20Richard Clapham: I think building a long-term sustainable piece is absolutely key. But I think you mentioned the word interesting there. It was a hindsight one. And I think across my career, in hindsight, in every application, you could have gone faster. Yeah, because now you know what you know. Yeah, I just think the speed at which decisions, and it's probably, personally, I've got faster as my career's going on, but I still think you can make those decisions and execute them quicker. And I think the reality is we were sitting on a significant opportunity of ours to be critical in Europe with the platform we'd built.

30:57Richard Clapham: there was an acceptability of mga's piece that we discussed earlier but the reality is we'd built the platform we had the distribution base of anywhere i think we could have moved quicker it's probably europe to diversify out that product base but you can go quick now but we can go quick now i think the other piece was there's always been a limitation on us in the u.s because clearly as part of the group there was a group strategy about not having any broking on the ground. Now, there is a crossover in the US between MGAs and brokers. So we could only ever be a specialist underwriting business.

31:33Richard Clapham: Now, if you look at the full spectrum of the MGA world, MGU world in the US, that is now completely open to us, whereas it wasn't before. And that's why I think that's going to be a significant area going forward. So could we move quicker in the US? No, I don't think so. Europe, yes. And, you know, sitting looking in the UK, and we talked earlier about building out our regional proposition, you know, there are a lot of London carriers who've gone out there and tried to go and get into the regional market who've singularly failed and pulled back out. Yeah. Because David challenged me actually probably my first weeks in.

32:13Richard Clapham: He said, we need to go and build something out in the UK. And I said, only when you've got the right distribution to be able to do that should we do that, and when we've got the right talent and knowledge base to do it. So we waited till we had those two in play. What about the hybrid, having a bit of your own balance sheet? What's your view on it? One, does it help you go faster? Two, does it really help much at all? What's your view on it? It's been a phenomenon. And I've had lots of those people on the podcast, and they've grown incredibly fast. and whether having that feature of them is what has helped them grow fast or not?

32:47I think there's two questions in that, actually.

32:49Richard Clapham: One is obviously the hybrid is a function of getting alternative capital and different capital into the market. Obviously, there's been more capital wanting to get into insurance to diversify itself, but at the same time, wanting also to get closer to the end customer in the chain. So obviously, if you want to bring capital in a hybrid front and into the MGA, it gives you a very natural ability to do that. And ultimately, I said earlier, as an MGA, our lifeblood is our capacity. So looking at routes to do that and bringing in other capital is absolutely key. And hybrid has been an absolute game changer in bringing other forms of capital in.

33:32Richard Clapham: but equally I mean it's normally a challenge I go the other way which is capital that should be the easiest for MGA should be traditional capital yes and you have to start questioning what is it about the way the traditional capital has operated that has allowed this big explosion of alternative capital coming in and the hybrid model to grow and it's sort of the most effective and cost effective balance sheet should be a carrier balance sheet. But the biggest challenge I would say, and it goes back to where we were talking about AI just now. Should be the most diversified, the lowest cost of capital, wasn't it?

34:10Richard Clapham: But actually, the highest cost of capital, when you ask what the expense is, is in the traditional space. And it's probably only since portfolio solutions have come into play that a lot of carriers have been able to articulate the difference in their costs between their delegated, their facilities, and their open market writings. They just turned around and said, my overall expense base was, say, 12.5%. And they would give that same expense to an MGA that was doing all the work. And they'd go, of course, you're not going to make the right returns if you're not allocating expenses correctly. And there's been a real aversion to looking properly at that expense allocation and seeing how that operates.

34:52About 20 years ago, there was a study that was privy to with EY. Looking at the expense ratio, amazingly consistent across the whole world, wherever you were, the expense rate was whatever it was, 30-something. But if you look at the admin expense ratio, it was always 13. It's still always 13. But the way people spent it was always completely different, but they still ended up with 13. It was one of those really, really odd things. But it was very hard for EY to, even the kind of access that a firm like EY would have with the CFOs, to really break it down properly.

35:23Richard Clapham: But even if you went back, I appreciate now, if you look at Lloyd's, 40 % are in MGA's delegated facilities. I mean, that's a significant part of Lloyd's. But if you went back four or five years ago and that number was around 20%, what always amazed me was none of the Lloyd syndicates had a separate P &L for their delegated business. It was always wrapped up in the individual lines of business. So how could you see the effectiveness of what was actually 20 % of your income? I mean, now we've obviously a lot more companies having portfolio teams starting to address that because they've got dedicated teams for looking at the delegated model and how that's serviced and what the true costs are and what the true performance are.

36:06Richard Clapham: So I think a significant change that's come through in the last two years, but it was been long overdue. And, you know, during that time, other capital's come in and is definitely continuing to grow and develop. But I think the ultimate model has to be having a balance of all forms of capital because they've all got different demands and needs. Do you think at the end of your next decade, how will the balance of capital backing dual underwriting have changed? Might some be your own, but then back, et cetera. How do you think that balance is going to change? Do you think there will be more alternative than there is now?

36:39Richard Clapham: I think, yes. I mean, if you look ultimately across all the large global MGAs, they've got mixed forms of capital coming in. And I suppose as you grow, that's just a natural feature of growing it, that you are going to diversify that capital. Because, of course, the capital that's already supporting you might say, well, actually, that's enough. I don't want any more exposure. I don't see it in either or, and I don't see it as a threat. Because ultimately, if Juul goes from its four-ish to six, the next evolution will be 10. The reality is, whether you're an insurer or whether you're an MGA, you can't grow without that capital coming in.

37:14Richard Clapham: But ultimately, if you are growing, then you need more capital. So there is a place for everybody in that. If you're growing profitably, you're generating some of that capital for them anyway. Yeah. Because they retain profit. There is a place for everybody in that model. And sort of our partners are absolutely key to us, as are the new partners coming in alongside them who are going to take us on that journey of growth. It's been fantastic sitting in London with this transformation. I mean, so much exciting things going on in terms of digitization, facilitation, algorithmic underwriting, smart follow, smart consortia, all these things going.

37:49And a lot of them are structured in the form of an MGA, almost because they have to be. Again, it's bringing underwriting, bringing risk and capital together. This is something you could be doing.

37:58Richard Clapham: it's very much on our strategy and we've got our own variations around it because ultimately I think some of the challenges for some of the insurers is they can't access what they now want to access. Yeah, because you can be nimble enough, you've got the tech. Yeah, if you bring four or five carriers together, you then give them a significant access point because you are very relevant in what you can then achieve. I think it opens up infinite opportunity because we've got a very scalable platform that is global. If you look at it, a lot of this is concentrated a little bit around London's moment in time.

38:37Richard Clapham: Take that out globally and take that principle right across the global insurance market. And I think you've got a really exciting proposition to look forward to in the future. That's why I get very excited. We talk about technology. The market's been due transformation in the way it places business for years. I mean, this is way overdue. We talked about EPS just now. I mean, it can't keep operating in the inefficient way we have in the past. And actually, ultimately, one thing we haven't touched on here is, are we all collectively providing the right solution for the clients quick enough in a way they want it?

39:11Richard Clapham: And the answer's not, which is why all these are starting to come in, because it allows the market to get more efficient. But the keep it is the evolution into that innovation piece next, which is going back to how do we provide the right product the clients already need. That almost takes you on the flip side of our AI conversation just now, which is obviously a lot of attention now is around AI as a product. And obviously there are already some standalone players have turned around and brought some of those into the market. There are others who are looking to endorse it into existing coverages, I think the exciting part for us is we've got a global platform and distribution that we can endorse it to existing products at the same time as using that global platform to create a standalone product as well.

39:58Yeah. What's your view? Do you think it will be a standalone? And often it's a standalone because of their exclusions. What's your view on that? There's a bit of a philosophical debate going on about whether you could exclude AI because it's so embedded already in everything everyone's doing, for example. But I suppose you can be diagnostic on this because it doesn't matter. You can do it both ways anyway.

40:16Richard Clapham: I think the key is do it both ways. I mean, the key is learning as you go through. I mean, the interesting reference point, because people say, I heard it likened to the next cyber, but the reality is if we really look back to when cyber first appeared, it took the market 20 years to evolve that. It's an MGA play. It's an innovation play. It's exactly what MGA's do. I would be really surprised if this is a 20-year play. I think this will move a lot quicker. Well, on this, I had people who I would defer to, Graham Newman and David Walsh, who founded CFC, but now with Kantara Capital, they said, well, AI is different from cyber because cyber almost created a new asset class.

40:53Digital assets were difficult to ensure, and we hadn't done that before there was a new asset. But actually, AI is just another tool, like a telephone or computer. And actually, telephones and computers have been included in biosmosis, just into normal general liability and it's been accepted. That's just what normal people do these days and that might cause them to be liable for things that they get wrong or damage they cause to other people. So that was their view on it. But I would prefer anyone who wants to really get into that debate to listen to that part of it and listen to that podcast from a couple of weeks ago.

41:28Right. Obviously, we've been through this amazing flowering in MGA formation. Do you think it's coming to a hiatus? It seemed to have gone through the cycle as well, though. So if anyone says that this was a cyclical thing. Obviously, the cycles do probably affect things around the edges that, you know, the tide coming in or out does affect things. But what's your view? Do you think MGA formation is going to carry on at the same rate? Or is it going to pause at some point now that we know the market's turned?

41:55Richard Clapham: I think the view is about 3 ,000 MGA's globally now, across 50 countries. And the reason I actually pulled up the 50 countries is you could probably identify where 90 % of them sit in 10 countries. So the opportunity, and we talked about how long it took for Europe to mature into an MGA, or maturing now actually into an MGA market. And UK, US, 10 % of the market is in MGA's and that percentage is increasing. Surely the opportunity in the other countries is for MGA's to come up to 10%. So I think overall, I think MGA's will continue to develop and grow and become a bigger part of the insurance ecosystem.

42:35Richard Clapham: I think where some of the challenges come, and I think there's always going to be room for the individual monoline specialist in country. I think it's always going to be there. But it's a lot more challenging to turn around and set up a monoline MGA. The cost and expense, we talked about the infrastructure you need now to run an MGA. That is a high cost to turn around and running those type of models. So I think the bigger MGA's are going to continue to drive and grow the significant dollar growth in the market overall. I think the market, as ever, always has an influence on the speed that are growing because obviously, typically, you tend to get more consolidation in a soft market because the reality is market rates coming down and you're revenue-based and your cost base is not changing.

43:23Richard Clapham: Margins get really tight and tough. And actually, the biggest challenge, and I remember speaking at a network conference a couple of years back, I said the very time you should invest most in your MGAs is at that point because they need to be ready to grow for the next market. And the challenge is when you're not making the levels of profit used to you, stop investing. So I think that's where consolidation comes in. And you've done a bit of consolidating yourself. Let's say your DNA is mostly organic, but there's an organic, you know, you're not shy of inorganic and transformationally inorganic.

43:56growth when it's available. So do you think there's an opportunity for you now? Yeah, for example, yes. In a particular territory, if it's something that's not necessarily transformational for you, bolt on acquisitions to plug them into this. Now you've got all the global network, you've got all the global distribution they possibly want. They're under a bit of a cost pressure because rates are going down. It would seem an ideal time for them to say, you know what, actually it makes a lot of sense to plug into dual now.

44:20Richard Clapham: I mean, I think you referenced our last major acquisition, which was in the US, with Catalytic. And that was about us creating that US platform from which to be able to grow and expand off. As we said, in the other regions, we've got those platforms in place. So plug-in M &A that allows them to come in and fulfill what they were trying to achieve is a real enabler. I think at the end of the day, being open for that is key because it's bringing in more really good talent and actually they can see the value of the additional platform that we have that will allow them to grow and develop faster and sort of as you said challenging times soft markets i think there's opportunities to have those discussions and look at how we bring those in probably the need for transformational m &a because we've got that global platform less likely but i would never say never you always look at the opportunity we've looked at the business side for the next 10 years for you what's the top priority you've done 10 what are we going to see in the next decade For me or for dual?

45:21Richard Clapham: Well, a bit of both. End with you, but fill in anything else for the next decade. Do you think, obviously, you've got that target. We've really run through that strategy. So maybe more you then. I think just starting off from a dual perspective, I actually feel we're now at the next chapter because we've built that global model. And what's really interesting is we talk about building a long-term sustainable underwriting business. Now, that obviously, underwriting profit is absolutely key to that. But if you're able to turn around and use your regional presence, in other words, you're always a local underwriting business.

45:58Richard Clapham: But when it comes around to your capacity, you offer them the ability. I mean, Jules in 21 countries. You can face them as a global entity. So you place a global entity. But what you then get is a very, we talked about diversity earlier. You get a very diverse placement because it's geographically diverse. I think because MJs are growing now, people often pigeonhole them into SME and that's just it. The reality is a lot of the MJs now are writing across all the client size. So actually to have a global placement that is also not only diverse in geography, but also diverse in client size, gives you an opportunity to really drive, I think, the most diverse and unvolatile and predictable underwriting result, which ultimately, one drives long-term underwriting profitability, but also in driving long-term profitability, then you're continually being able to create profit in the MGA, which allows you to invest and continue to invest in future talent.

47:01Richard Clapham: So it self-grows the model and it's interesting if I look at our new teams in the last three to four years they're probably going to grow 60-70 % of our growth because we're in that underwriting market now where underwriting discipline says you need to be stable in that base so for me the excitement for Jewel is to use that platform when we've shown how we can do it and really bring in more talent and use what we've got to continue to drive the new business opportunities through new teams coming in. So I think we've had a transformation to get to the platform we are now. And I think the exciting times have come.

47:39Richard Clapham: Embrace technology we were talking around just now. Embrace a platform that's been created. Take the distribution and take that to another level and actually distribute your products in a way using technology that enables. We talk about in Juul about enabling people to do more, whether that be our carriers, whether it be our employees or whether it be our brokers ultimately helping you do more is what we believe in so if you take that through being able to continue to bring new people in and you ask from a personal point of view I've always said when I walked in how can we get rid of Baudrill and things like that and I think the excitement now of technology coming in and what you can do and how quickly you can do that and how more you can understand your business and how you can drive decisions because you understand that more just sort of opens up a new spectrum that probably one hadn't seen.

48:31Richard Clapham: And I think if you look at the level of change that's come through globally, I mean, if you look at the world events that have happened, it's a very different place. But I would say the MGA space now is as exciting now as it has ever been. And I think the potential is as great. But I think a key piece for me is sort of, I think experience counts for a lot. And we talk about embracing these changes and all the rest of it. I think being able to help more talent coming into Juul and help them really reach their full potential and what they want to do, I think, is for me an absolute key part now, which is what makes the job still really exciting, which is how many more people can we bring in and help them on that journey?

49:11I was just reading through my list of questions. I was remembering one that I have forgotten to ask you, which is maybe it's an old chestnut or it might be the elephant in the room question. But I'm sure you get this all the time. And there's been a lot of reporting around it. But obviously, being part of a Howden group, we know that there's more activity of Howden on the retail side in the US. Some of my colleagues in the press have spent time sort of analysing how much of a negative effect this has had on Duel in the US. How much of an effect has it had? and what's your strategy of getting through it?

49:41Richard Clapham: So I think the reality I referenced earlier, the fact that we'd done some restructuring and some of that restructuring was in the US. So when you look at some of that change, that was actually driven by the restructuring overall. I also talked how much potential there is for us in the US. And that is around, I mean, Juul is predominantly a wholesale market and that is going to continue. And it's how we can continue to bring more talent in and service those wholesalers. And in turn, I just think the opportunity in the US is really significant. And I would say more of what went through was around that restructuring piece.

50:22Richard Clapham: Clearly, our whole strategy is around growing distribution. And that 12 ,000 needs to go to 15 ,000. And that way you keep a balance book across that distribution piece. And I suppose what's happened in the US is only just bringing it into line with your competitive situation, strategic situation in every other territory in the world, because in most other territories in the world, of course, Howden is a retail insurance broker. So it's not something strange and weird, is it? I mean, Jewell has existed across that piece. But, you know, ultimately, we talked about that specialist underwriting piece earlier.

50:56Richard Clapham: It comes down to if you're producing the right product that's right for the client, distributed the right way, service the right way, then you are real value to a client. And the broker has to find you then. Well, you should. Yeah. And, you know, it's about ensuring at all times. I mean, it keeps us sharp. It ensures at all times that we are really sitting there at the forefront of creating real client solutions. And ultimately, as I said, helping our brokers do more is about help them win more clients. Helping win more clients is about getting the right products. So that is Jules' model for the last 28 years, which is it's all about being focused on the client and what they need.

51:38Richard Clapham: What can we do to turn around and produce the products? How can we turn around and partner up some of the best capacity providers in the world to give those clients the best product and the best service? If you keep doing that, you'll be doing fine, Richard. Hopefully so. So personally for you, still really enjoying it, aren't you? I can see it in your face. You get real energy. And I think the MGA space, as I said, is a really exciting part. I think there are many more variations of what MGAs do. And there are insurers creating their own MGAs. I think it's great for the MGA space. I think just makes us more and more relevant and I think it makes us ultimately in ability and another key part I think we talked around that innovation is force for good and you know in innovation is starting to look at products that can really make a difference and address some of the world's problems going on as well and you turn around you talk about excitement it's been able to get into these sort of things and actually realize what you're doing is making a change as well but you're doing what we're all good at is bringing insurance to the front and make it make a real difference.

52:40Because of course, it's a classic way of innovating and MGA can do that because you can convene the market and you can syndicate that market straight away so that no one's taking too much risk. If there's some particularly novel risk, you can pioneer it, you can help pioneer it because it's an easier way of doing it, a very efficient way of doing it, isn't it? You de-risk innovation.

53:00Richard Clapham: Yes. I mean, because actually a lot of carriers wouldn't want to turn around and take that risk on their own. Yeah, but if they can take 5 % of it and someone else has invested in the smarts to make that happen and really thought about it and think, well, I can back this and I can see how it goes. And if it doesn't work out, I can stop and it won't be terrible. If you're growing product and creating product and the market takes on, isn't that great? Because you've done something that's really driven another agenda and created another product that clients are really wanting. I think our challenge as an industry is, do we always produce the products that our clients want or we just produce the products that we think we want to ride.

53:38Richard Clapham: They are slightly opposed to each other at times. So anyway, yes, you fell off a horse, age 19. And I suppose what you're supposed to do is, I presume you're still right, because you're supposed to get back on the horse again, aren't you? Or try to, unless you have to go to hospital in between. But you get back on the horse as soon as you're fitting well again, don't you? Do you still ride? So actually, I mean, recreation a bit, but actually this summer I went off on a riding safari to Botswana, which was on my list of bucket list things to do. Just gives you a completely different view rather than sitting around the Land Rover or whatever else.

54:12Absolutely. Interesting times.

54:14Richard Clapham: Not one for if you're risk-adverse. No. Especially if you don't get chased by a tiger or something. That could be quite fun. But anyway, we'll see what you ride on, Richard. Thank you. Looking forward to cantering on. Thanks very much. Thank you. Well, I hope you enjoyed today's episode. If you did, don't forget to subscribe or leave a like or a review or recommendation on whatever podcast platform you used to access this program. These really help get the word out. Before we go, just a quick reminder that advertising slots are available here and in other places in the Voice of Insurance podcasts.

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55:30Voice of Insurance is produced by me, Mark Gagan. Music was written by Anna Gagan and produced by Carlos Gagan.