Meet the underwriter: Tom Wallace, Tokio Marine Kiln
Meet the underwriter: Tom Wallace, Tokio Marine Kiln
TOM WALLACE (aged 40) fell into the world of insurance after graduating in Archaeology from Southampton University. He began his career with Swire Fraser and, through subsequent mergers, found himself working for some of the biggest names in broking, Benfield and Aon. In 2009 he moved to Tokio Marine Kiln, specialising in US Property, Liability and Motor business.
TT: How did you get into the insurance business?
“It was a mixture of desperation and nepotism! Having originally done work experience post-school and university, I came back from travelling with no money whatsoever and found myself calling up old contacts. Starting on 6th October 1999, I managed to get into a small broking firm on the US reinsurance side and the rest is history.
“Swire Fraser became Swire Blanch, then Benfield and finally Aon, before I joined Kiln in June 2009. The move from a small, niche broker and a niche department within a bigger broker (Benfield) into the corporate beast that was Aon, persuaded me to change from broking to underwriting when the call came.
TT: What have been the major developments in the business since you started?
“At a basic level, professionalization. The days of two jackets [one worn, the other left over the office chair] have largely gone! We now provide a much better service to our clients and to brokers, with 24 hour contact.
Costs and regulation have also increased in the last few years, and are having a very detrimental effect on margins, exacerbated by the state of the market.
“There has been a blurring of lines in our market for distribution. From a Kiln perspective, as long as we understand the product, how Clients access the market is largely irrelevant. We leverage our position mainly through binding authorities and relationships with our key brokers, including Tysers but we also see business on a direct and fac and reinsurance basis.
“Our relationship with Tysers is vital because few underwriting syndicates have a specific marketing arm, so brokers are essentially our marketers. They understand our appetite and how we define profit. They go out to see the cover holders and potential clients and know where the gaps are in our business plans – they then provide the business to fill those gaps as well as manage existing relationships.
“Binding authorities are a combination of underwriter, broker and cover holder selling a product to a fourth party, so it’s critical that all our interests are aligned. Everyone needs to make their margin, so it’s a lot more congenial than other types of business – which is why I like it. But a broker is crucial to make sure it works.
TT: How do you view the market currently?
“People equate the current market to that of 2000/1 and Robin Hargreaves, who was essentially the founder of our team, talks about it being one of the softest markets he can remember. We’re beginning to see some change of sentiment from deteriorating results, job cuts, companies withdrawing in certain lines – which is normally a precursor to markets bottoming out. We’re all being squeezed, so it’s very tough at the moment.
“What will change the current state of the market? Everyone has a pet theory; interest rates, macro-economic changesbut, specifically to the business we write, perhaps catastrophic loss above and beyond what the RMS and various statistical models expect to cause paralysis.
TT: How do you rate the standard of US property underwriting in Lloyd’s?
“On the whole it’s still very good. We operate in a syndicated market, so we see and understand the appetites of our peers and what they are doing. People are under huge pressure to make commercial decisions and maintain relationships and we are in a tough, competitive environment but it is holding up. A lot of that is down to the brokers and the better the broker, the more we understand what can and can’t be done.”
TT: What are the competencies you look for in your cover holders?
Amongst other things they are underwriting expertise, long term planning, efficient delivery and service.
TT: What is your view on the 2016 Atlantic hurricane season?
“In the overall scheme of things, Hurricanes Hermine and Matthew aren’t going to move the dial at all. We’re waiting to hear what the loss expectations are from our cover holders and claims managers but in terms of the overall hurricane season, it’s as before. Our business plan is geared around hurricane exposures, with the biggest exposure in states like Florida where every Kiln department will have some exposure – US property, Reinsurance, Marine and Aviation and our capital is geared around that.
“It’s been an incredibly benign period – statistically, we should have had many more strikes, so we’ve been lucky, but the magnitude of these events have not been enough to scare people or capital. It has to be outside the parameters of companies’ models – otherwise they’ll simply say it performed as expected.
TT: What is your favourite place to travel in the US?
We constantly ask ourselves where we would go if we had to move out to the US and Denver would be high on the list. A beautiful part of the world, with a lot of out-door living with biking, skiing, and you can hit the golf ball miles further in the clear air!
TT: What is your favourite golf course in the US?
“I’m desperately trying to work my way through the top 100 golf courses of America. The Olympic Club in San Francisco is one of my favourites – because I normally play abysmally badly but I managed a few decent shots there, which was a pleasant change!
TT: what do you most like about the business?
“The face-to-face nature of transactions, where our interests are aligned, as evidenced by the fact the vast majority of our relationships go back over 15 years and more. Brokers such as Tysers are critical to maintaining balance and perspective of both underwriters and coverholders.
Whilst there has been a lot of growth and merger activity in our market segment we still have direct relationships with the owners and managers of our Coverholders – the people who can make decisions. It’s an awful lot of fun as a result.
TT: Who has been the biggest influence on your career?
“A chap called Ivan Johnson at Benfield, when I first started my career – his adherence to detail and advice to always ask questions.
TT: Tell us something not many people know about you
“I have an identical twin brother who once did a day’s work for me many years ago when I was temping at a large merchant bank. We decided to do a job swop – he was more successful than me and I got a lot of compliments the next day!