Insurers see them as vital distribution partners and brokers are increasingly turning to them. Underwriting agencies are riding high in a changing market

By Bernice Han

One word can best sum up the state of the Australian underwriting agency sector: vibrant. The past few months have demonstrated the underwriting agency scene is flourishing in the face of the major mainstream insurers’ present – and in the claims and capital environment understandable – low appetite for risks.

The insurers increasingly prefer to play the role of capacity providers and to let their agency partners take on the business directly.

Brokers, in turn, are seeing underwriting agencies as the logical alternative source of cover for complex niche risks.

Some examples:

Last August Zurich deepened its relationship with Steadfast-backed NM Insurance with an agreement to provide capacity for its underwriting agency, Proteus Marine. The agency specialises in commercial marine cargo, carriers load, commercial hull and marine liability risk solutions.

In February the sector received another vote of confidence when Simon Lightbody, formerly Steadfast Underwriting Agencies chief executive, announced the launch of Rhodian, backed by a major US investor, to support start-up agencies.

And in March newly created SafetyCulture Care launched with capacity from Allianz, after technology company SafetyCulture acquired full ownership of Mitti, a venture it established in 2020 in partnership with QBE Ventures.

Mr Lightbody says the goal of Rhodian is to act as an incubator for new entrants by providing them with the infrastructure they need to grow their agencies. Rhodian has the financial backing of US-based specialty wholesale distributor Amwins, which has a 40% stake in the venture.

The incubator will provide services like data analytics, legal and compliance, marketing and capacity management for newly established agencies. In exchange Rhodian will take equity for providing the support.

“Stepping away from Steadfast allowed me to view the possibilities,” says Mr Lightbody, who is Rhodian’s Chief Executive.

He tells Insurance News the outlook for the agency sector is “very buoyant” due to a variety of reasons. The ongoing hard market conditions, especially in relation to pricing, mean insurers are looking for a “sensible” model to do more business.

“They are looking for different ways to deploy their capital more effectively, and the people who work at underwriting agencies are experts with specialty risks,” Mr Lightbody says. “They see an underwriting agency as being able to do all the work more effectively.

“So I’m very bullish on underwriting agencies and their ability to distribute products to the broker network.”

Working with Rhodian means a new agency “can concentrate on their expertise which is underwriting” and leave the task of overseeing marketing, regulatory compliance and finance to Rhodian, he says.

Preliminary estimates indicate the underwriting agency sector wrote about $8 billion in gross written premium in 2022, according to peak body the Underwriting Agencies Council (UAC).

UAC says the figure represents a considerable increase from 2021.

Chairman Heath Amber, who was elected by underwriting agency members to the role in December after Lion Underwriting Managing Director Kurt Nilsen stepped down, says the sector is well placed to grow further given the changing risk landscape.

It’s not just the growing demand for complicated, complex, niche risk solutions that is turbocharging the sector’s rapid rise in the last few years. It’s also the way risk classification has changed significantly as the insurance market became harder, especially in the small to medium-sized enterprise (SME) client segment.

“Over the past few years the SME to mid-market, which was once perceived as vanilla, has now got some level of complexity in it,” says Mr Amber, who is the Chief Executive of AUB’s Austplacements.

“That business is finding its way to bespoke underwriting agencies, and these agencies are positioning themselves to be the solution.”

Mr Amber sees underwriting agencies having an edge when it comes to non-vanilla risk placements. But that does not mean that they are necessarily competing with insurers for business.

He says insurers have over time “repositioned their business” and that has facilitated the growth of the sector.

“Underwriting agencies have been able to recognise those opportunities and say we know you’re not wanting to leave this space and we can help you be there. We’ve got the expertise and the knowledge, and we’ll do the front of house work, but we need you as our capacity partner.”

He says a number of mainstream insurers prefer to work with the underwriting agencies. “They see us as a distribution point for them.”

Berkley Insurance Australia is one such insurer. The commercial lines specialist has been working with underwriting agencies for more than 10 years, and National Facilities Manager Paul Bleakley says US-based Berkley “has always understood that insurers cannot be everything to the brokers we look after”.

“The underwriting agency channel allows us to support brokers and their clients with the expertise they need on portfolios of business that we can support.”

Berkley Insurance Australia expects the underwriting agency segment of its business will continue to grow over time. Mr Bleakley says the insurer continues to meet with prospective agencies with a view to supporting their portfolios.

Mr Amber says the feedback he’s getting from brokers who have approached underwriting agencies is that they do so with the confidence that even if their clients don’t tick all the boxes in the initial risk assessment phase, every effort will be made to find a fit-for-purpose solution.

“Our member agencies always find a way to meet that that challenge, to meet that limitation with new ways of thinking,” Mr Amber says.

An insurer may find a particular client does not meet its risk appetite criteria and decline the business. But an underwriting agency will go the extra mile to work out a solution, even if it means having to co-arrange a facility with other underwriting agencies.

And the added bonus? Mr Amber says personal engagement with an underwriting agency is another drawcard for brokers.

“It’s about being able to get hold of someone and being able to talk about their clients’ needs,” Mr Amber says. “Brokers like the fact that they’re engaging with the decision-maker at the underwriting agency. Brokers love that more often than not when the phone rings it gets answered. And the broker will usually work with the same person from beginning of the transaction to the end.”

Are there any potential speedbumps that may slow the sector’s development?

Mr Amber says how the insurance cycle plays out and its impact on the appetite of capacity providers are key things to watch out for.

“Capacity constraints have always been front of mind for all operators of agency businesses,” he says.

A few years ago Lloyd’s, a key capacity provider to UAC members, reviewed its portfolio and took action to strengthen its books. The process led to a change in how Lloyd’s viewed certain lines of risk.

“It is never a certainty that capacity will be with you forever, because market trends and events can influence a capacity provider’s outlook,” Mr Amber says, referring to the Lloyd’s review.

“The provider may say they no longer want to be in that space. It’s a crucial risk factor and we have to make sure we have got support from our capacity partners to continue doing business.”

Lloyd’s, which is indisputably the leading capacity provider to Australian underwriting agencies, is all set to further entrench its position after another year of “exceptional” growth last year.

Australia and New Zealand Regional Head Chris Mackinnon says total gross signed premium in the Australian market is expected to exceed $4 billion for the first time, which would be up from $3.4 billion in 2021.

“We’re always looking to continue to grow and build the market, but with a sustainable and profitable mindset,” Mr Mackinnon tells Insurance News.

He says Lloyd’s is now “looking to support its agency partners” after going through a two-year program to remediate some “underperforming” areas.

Even during the remediation in 2017 and 2018, Lloyd’s did not withdraw from a single class of business in Australia, Mr Mackinnon says.

“Like every insurer, we went through a short period of time where we had to do the right thing and worked on the underperforming businesses,” he says. “So we’re now back where we want to be and we’re here to stay.”

Lloyd’s bullish view on the Australian market – its fourth largest – is shaped by what it has seen taking place in the sector in the past few years.

Mr Mackinnon says underwriting agencies remain flexible and nimble – strengths that are highly prized by brokers who now see agencies as the default solution provider for complex, unusual risks.

“They are simply moving faster to bring a product to market and I think that that’s been a big driving point.

“The other thing we’re hearing quite clearly is that brokers really enjoy the ease of dealing with agencies and the service levels that they get from agencies.”

He says most brokers have in the past approached insurers directly, but the traffic has reversed somewhat in the past few years as the insurance market became more difficult.

“What we’re seeing is a constant increase in enthusiasm by brokers to engage with the Lloyd’s market and our coverholders,” Mr Mackinnon says.

The recent UAC expo in Sydney is another demonstration of Lloyd’s resolve to grow its Australian business. The UAC/Lloyd’s expo event on February 16 marked the first time the peak body has offered naming rights for one of its expos.

Mr Mackinnon says the presence of more than 500 brokers at the expo on a Thursday morning “is a really, really good sign” for the underwriting agency sector.

GT Insurance Brokers Director Glenn Thomas, who is based in the Victorian regional city of Bendigo, says he regularly checks the UAC website for underwriting agencies who may have the solutions for his clients. It’s something he has been doing more often recently because of the ongoing hard market conditions.

“Insurers are now unwilling to take on risks that don’t fit their box,” Mr Thomas tells Insurance News. “It has got to the stage where I just go straight to an underwriting agency.”

paul epsilon

Only just getting started

Bespoke solutions, new risk products and listening skills show the way

Epsilon Underwriting Agencies Chief Underwriting Officer Paul O’Leary sees taking the time to really understand a client’s risk needs as an essential skill for the industry’s specialist underwriters.

He says Epsilon has had “unprecedented interest” from insurers interested in participating in the agency’s cover facilities, and that the UK-owned business, like the overall underwriting agency sector, will continue to do what it does best: solve the problems that the mainstream insurers are not able to solve.

He says Epsilon – which has been in business since 2001 – continues to thrive because it takes the time to listen to what brokers and their clients require.
“We are focused on bespoke underwriting. It’s about understanding the client’s risk and providing insurance solutions.”

And he sees the interest from insurers to work with underwriting agencies like Epsilon as “a great sign that we’re doing the right thing for our capacity providers”.

“We listen and we look to see if we can build products to satisfy those needs,” Mr O’Leary says. “As an agency we started with liability and then added financial lines, property and construction.

Epsilon’s latest offering is parametric cover, “for which we are barely scratching the surface of the possibilities”.

Parametric products are a risk transfer option ideally suited to the Australian market, given the country’s exposure to natural perils.

“The product can be utilised across multiple industries and occupations using various pre-defined triggers,” Mr O’Leary says. “Given the uniqueness of the product structure and its relative ‘newness’ to the Australian market, it has been a challenging education exercise to get the message out.”

But Epsilon is not shying away from the challenge. The agency is determined to raise awareness of parametric products and has prepared a technical brief for brokers and their clients.

Mr O’Leary says brokers “truly need” their working partners – insurers and underwriting agencies – to understand the risks facing their clients.

He says the increasing trend of insurers pushing brokers towards quote-and-bind portals with lucrative incentives “is not necessarily providing the best solutions for the insured”.

“No matter how hard you try to compartmentalise commercial insurance, there is always something unique about each insured, and a good broker will identify that and make sure they have their client covered.”

Time for disruption

Agencies’ potential excites industry veteran

SafetyCulture Care Managing Director Frank Costigan knows the insurance business inside-out, and he’s excited about the future for underwriting agencies.

The highly regarded former QBE executive, who has held senior roles with several insurers, says the number of underwriting agencies in Australia has expanded significantly over the past decade. That in turn has led to an increase in the type of products and the levels of cover that have become available.

Frank Costigan

“I think the rapid pace of growth is due in large part to the success that agencies have achieved as a result of their ability to prioritise customer service and the way in which they’ve gone about empowering underwriters to make decisions, including declining risks, far more quickly,” Mr Costigan tells Insurance News.

The availability of new technologies has also supported the sector’s growth. “New technology available to underwriting agencies – particularly the technology that is not reliant on legacy systems – means that agencies can really be nimble and move a lot quicker than the majors.”

He says with capacities shrinking both locally and abroad, it is becoming increasingly difficult for Australian customers to get the coverage they need through the local market.

“As markets get tougher, I believe there will be even more reliance on agencies that can work quickly to find the right coverage.

“Business insurance is long overdue for some disruption and what we’re bringing to the table with SafetyCulture Care. It has the potential to redefine the nature of the relationship that businesses have with their insurer,” Mr Costigan says.

Launched in March, SafetyCulture Care is aimed at the SME market. Its capacity is being provided by Allianz.

Technology company SafetyCulture established the agency after acquiring full ownership of Mitti, a venture it launched in 2020 in partnership with QBE Ventures.

Mr Costigan says the business plans to launch SafetyCulture Care in other markets, with the US on the itinerary for later this year.

Mike Edmonds

Specialisation keeps agencies safe

But watch out for the impact of catastrophes: UAC VP

NTI Executive General Manager Mike Edmonds, who is also Vice President of the Underwriting Agencies Council, says rising costs and the impact of global and local events are things to watch out for in the coming months.

“As catastrophes continue to affect the reinsurance market this will flow into costs, and some agencies may be affected more than others due to scale,” Mr Edmonds says.

“But having said that, some of the specialisations may in fact protect agencies. This should flow into pricing.”

He says underwriting agencies should take note of the cyber threat affecting businesses big and small in Australia and globally.

“The cyber threat to agency business is real, and customers are less tolerant to poor reputation businesses,” Mr Edmonds says. “A cyber incident could damage an agency in both the short and long term.”

He is upbeat on the underwriting agencies sector’s future, saying agencies can maintain their rapid pace of growth by applying new technology and recruiting the right talent “to support an efficient distribution of specialised products to market”.

“The expertise, focus on service and excellence in claims will drive agencies to be the go-to for the market,” Mr Edmonds says. “This comes down to reliance on excellent providers, but much more importantly agency people who have a real passion for the niche that they operate in.

“Investing in people through recruitment, development and most importantly culture will be the driver of growth into the future.”

Doing the job correctly

Knowledge and a strong service ethic are key to success, says Colin Fagen

Blue Zebra Managing Director Colin Fagen, who stepped into the underwriting agencies sector when he launched the company in 2018, says agencies have been able to “deliver the fundamentals correctly” for brokers and customers.

“Agencies’ depth of knowledge in the products and industries they specialise in, combined with a strong service ethic underlined by timely communication with brokers, are key success drivers.”


Mr Fagen, who was formerly a senior manager at QBE, says these drivers “build on what are often already longstanding relationships in the market. These are what we would describe as the ‘pull factors’ for our customers, and this competitive advantage needs to be maintained to continue the growth curve.”

And if the sector is to scale further heights, Mr Fagen says underwriting agencies need to keep investing in their business infrastructure, including technology.

Underwriting agencies must also ensure their employees are up-to-speed on market developments.

“The whole industry is finding it difficult to recruit, with Australia currently experiencing structural unemployment levels,” Mr Fagen says. “This is affecting agencies’ ability to staff-up with the appropriate level of insurance and associated skills.

“We need to continue to bring new individuals with varied skill sets into our ranks.”
He says ongoing cost pressures need to be managed and warns it “could take a while” for inflation to ease. “And that will impact price settings.”

gabriele McDonald

Where agencies get their specialists

Specialisation and complexity find a home on the edge of the insurance mainstream

Protecsure Managing Director Gabriele McDonald is typical of the professionals managing underwriting agencies, in that she moved across to capitalise on her experience in “mainstream” insurance.

It’s a common story for Underwriting Agencies Council members who moved across and set up their own businesses where their particular skills and experience find an absorbing and profitable home.

Ms McDonald says the underwriting agency sector will continue to prosper as it always has. And she doesn’t believe consideration of the sector should be limited to non-vanilla risks.

“The need for specialisation and underwriting in its true form will only increase as risks and exposures become more complex,” she tells Insurance News. “Agencies thrive when they either specialise – regardless of complexity – or just do it better. And that can be as simple as answering the phone.”

She says Protecsure – which this year is celebrating 25 years of partnership with Chubb Insurance Australia – has grown by delivering the sort of specialist risk solutions clients are seeking. Even during the pandemic, the agency performed well despite the Covid-19 lockdowns.

Underwriting agencies drill into the niches, with Ms McDonald giving as examples the agency’s specialised mobile equipment product that covers the usual and unusual, as well as a liability product that focuses on sole traders and micro businesses.

“This means we have a solid book of tradies in both our equipment and liability portfolios, so there was always going to be an impact [as a result of the lockdowns], but it was minimised by brokers encouraging their clients to maintain their insurance coverage,” Ms McDonald says.