The Arch way

From small beginnings, the international insurer is building an increasingly important presence in the Australian market

By John Deex

Bermuda-based Arch Capital Group writes more than $US20 billion of premium across insurance, reinsurance and mortgage insurance segments – yet it was formed less than 25 years ago.

There’s a similarly impressive growth story, albeit on a much smaller scale, developing locally.

Arch’s Australian operation, which sits under the Arch Insurance International umbrella, traces its roots back to 2009, when it primarily provided coverholder support.

But after getting boots on the ground, and growing tenfold over the past decade, it has evolved into a very different proposition.

Arch now has a staff of 70 in Sydney and Melbourne, working exclusively with brokers on six lines of business: directors’ and officers’, professional indemnity, casualty, accident and health, commercial property, and cyber.

“The whole purpose of the Australian operation is to capture local expertise, and have underwriters serve brokers on a local basis,” Arch Insurance International chief executive Hugh Sturgess tells Insurance News.

“And it has grown so much that it’s now in a relevant position, actually serving brokers on a much broader scale. We’re all very proud of it, in the sense that it has grown nicely, and we think it’ll continue to grow.

“The group ethos is, we’re now big enough to compete with more established brands, and more established players, even after just 25 years of existence. And I think that translates into the Australian story.”

Arch Insurance Australia regional manager Dom Brannigan says key principles have paved the way for success.

These include a flat structure, positive work culture, and underwriter empowerment.

“This enables us to provide the solutions quickly to our brokers and clients,” he tells Insurance News. “It’s based around ownership and accountability, but empowerment to do the job.”

Arch is a specialist intermediated player, with no desire to get involved in personal lines, but it is keen to keep developing its areas of focus – and potentially add more.

“We’ve just increased our line size in commercial property for a bit more relevance and to look at new segments within that,” Mr Brannigan said.

“Cyber is a new emerging market that we’re doing globally, and we’re excited to bring that to Australia as well, so that’s another growth area. We’re still in our adolescence in Australia. So there’s a lot of ‘more of the same’ for us to do.

“But in conjunction with that, it’s also looking at how we revamp our products to meet the demands of the market, the brokers, as we go through different cycles.

“We’re very solutions-focused, and that’s where I think we’ll get further growth.

“The market’s competitive, but it’s always competitive, so it’s very much about running our own race and trying to support our distribution partners.”

“The group ethos is, we’re now big enough to compete with more established brands, and more established players.”
Arch International CEO Hugh Sturgess

Cyber provides an opportunity because it remains an undeveloped market. Arch focuses on large accounts, leveraging group expertise.

“We’re seeing more and more risk transfer requirements in that space,” Mr Brannigan says.

“There’s a long way to go before we understand how it really performs, but there’s absolutely client need for it, as we’ve seen in Australia and the UK in relation to some of these large attacks.

“I think that sort of landscape will continue, especially in terms of the governance of organisations to make sure they’re looking after their data.”

Mr Sturgess envisages an “inevitable march” of cyber adoption.

“If you’re an online business, if you’ve got personal records, you must have some sort of protection. And we believe the brokers are onside, in terms of wanting to provide that to customers, so long as we can provide something unique.

“We didn’t write cyber before 2019 in [Arch International], because of how narrow that business was. It’s just gone through such an expansion. We don’t think that’s going to suddenly stop.”

Technology has enabled Arch’s rapid progress, and the insurer is working hard with brokers to continue the evolution while maintaining access to expertise.

“Brokers and carriers are looking for ways to better transact business with each other,” Mr Brannigan says. “We’re all looking to make the transaction easier without losing anything in that process.”

Mr Sturgess believes Australia leads the way in digitisation of product delivery, and the appetite for it.

“It’s further advanced than the UK, certainly more than Europe. The buyers want those opportunities, so we’re happy to provide them.

“We just promoted Ed Short to head of digital for the Arch International business. He’s evidence of the emphasis we’re putting on digital, and Australia is one of the key places that he’ll be focused on, because there is so much advancement.”

Technology reduces friction and cost, Mr Sturgess says, but relationships and human interaction remain key.

“We can automate and we can improve the experience, we can improve the cost. Those are great improvements to make, but humans still need to be involved.”

Arch accepts the market is softening but says it is set up to thrive in all stages of the cycle, and it still sees strong opportunity in Australia.

Mr Brannigan says there is “certainly downward rate pressure” in a competitive market, but there’s still margin to be had.

“It’s really about making the right decisions, supporting your brokers with their clients, and being consistent with what you do for sustainable outcomes.”

Mr Sturgess stops short of labelling the market soft, but concedes “it’s softer than it was”.

“The distinction is important,” he says. “It’s not an irresponsible phase at this point, but we’re built to be part of a competitive environment, and we can’t fear that, because the softer phase tends to last about eight times longer than the harder phase.

“If you get the right talent, you get the right relationships with the brokers, then you can weather those metaphorical storms.

“It proves the durability of certain carriers. If you are doing all the things you should be doing, you can survive a softer cycle as much as a harder cycle.”

Arch doesn’t rule out acquisitions, but its primary focus is more organic growth, and Australia is at the forefront of that push.

“We’ve been around for a long time in Australia now, and it’s been a great investment,” Mr Sturgess says.

“The growth we’ve seen over the past five years – if we can continue that for a few more, that’s kind of the scale, the trajectory we’re on now. It’s just about sustaining it.”