Richard Watson, co-founder of the specialty re/insurance startup, talks to Paul Walsh about the importance of enjoying work, dealing with sceptics and an ego-free approach to risk management
Naming an insurer after a 17th century architect may raise more than a few eyebrows in a sector where a trendy name has almost become a prerequisite for new enterprises.
However, the founders of Inigo Insurance took inspiration from British architect Inigo Jones, who contributed to the development of London icons St Paul's Cathedral and Covent Garden as well as the Queen's House in Greenwich.
Like Jones, the company says it wants to "build something amazing, from nothing".
Inigo joined the Lloyd's market as one of five new entrants for 2021, after raising $800m from a consortium of global investors. It began underwriting in January and purchased the assets of StarStone Underwriting including its Lloyd's Syndicate 1301 and its managing agency, from Enstar Group.
Its founders got together after distinguished spells at speciality insurer Hiscox.
Richard Watson became chief executive, Russell Merrett took over as chief underwriting officer while Stuart Bridges became chief financial officer.
Having fun
Watson tells InsuranceERM the key motivation to setting up Inigo was to "rediscover the energy" you get from working in the sector.
"There's no politics, no BS, just a willingness to help each other out and do the right thing," explains Watson.
"A key factor we felt strongly about was the importance of having fun and laughing a lot – that is not incompatible with being professional, and many of us felt that had been lost in bigger companies."
"A key factor we felt strongly about was the importance of having fun and laughing a lot"
He also explains the choice to set up Inigo in the Lloyd's market was a simple one, even though the market has had plenty of challenges with operating costs, bureaucracy and simply being unprofitable.
Earlier this year, the corporation's chief executive John Neal said the market had to make an underwriting profit in 2021 as investment returns will no longer offer their previous level of support. The corporation posted an overall loss of £887m ($1.2bn) in 2020.
"Lloyd's seems focused on taking cost out of the system, looking to the future, and grasping tough issues like climate change, diversity and culture in a way that is meaningful, but not grandstanding," says Watson.
Addressing sceptics
The rush of investment in re/insurance start-ups in 2020 brought some scepticism from incumbents over the potential of start-ups to add value, and concerns over whether they may stifle the favourable momentum in market conditions.
"It's such a lousy mindset," Watson says of the critics.
"I just don't spare them a thought. The proof will be in the performance over time, from them and from us."
Watson explains Inigo maintains a very specific approach, writing only seven classes of business, namely reinsurance, property insurance, terrorism and political violence, general liability, directors and officers, marine liability and energy liability.
Above all else, Watson stresses "you have to see life from the buyer's perspective".
"You have to demonstrate you're putting decision-makers forward in the negotiation, who understand the risks and are empowered to do a deal.
"We are quite capable of building our own legacy and irritations over time, so we have to watch out"
"You have to be prepared to act quickly and be really honest in your judgement of your actual performance. Critically you have to be able to match risk to rate."
He adds this approach in some respects can be harder for incumbents as "they're anchored to the deal that was done last year".
"[For incumbents] it's just one risk of a larger portfolio, and they probably spend more time 'managing' than we do."
Watson says the firm benefits from starting with a clean slate, although he's mindful that may not last for long.
"The infrastructure, the systems and the tools have advanced so much in just the last few years.
"Giving underwriters better analytics and risk data is important. For the moment we have the advantage, but we are quite capable of building our own legacy and irritations over time, so we have to watch out."
Building up a risk function
Inigo strengthened its risk function in February with the appointment of Vanessa Hartley as chief risk officer. Her CV includes over eight and a half years at Catlin, prior to its acquisition by XL Group, with over six of these as UK head of risk.
She also spent five and a half years in a variety of roles at Swiss Re.
"The style and approach of your risk manager is what truly delivers an embedded risk function"
At a time when many insurers are attempting to modernise their enterprise risk management in response to market challenges, Watson says Hartley's appointment reflects Inigo's "low ego approach" to the risk function.
"We don't want prima donnas who spend their whole time trying to trip you up, to prove how clever they are – there's plenty of the 'only an actuary would understand this' nonsense in the risk industry.
"I think the style and approach of your risk manager is what truly delivers an embedded risk function. Otherwise, it's held at arm's length and the business does the minimum to comply and just enough to shut-it up."
To work more effectively, risk functions should discourage a "box ticking" approach, he adds.
Climate
Watson is fully aware of arguably the most pressing risk for the industry: climate change.
Regulators around the world are encouraging greater focus on the financial risks associated with climate, while insurers themselves are committing to net-zero emissions in their investments and underwriting.
Watson explains the industry can manage the uncertainty posed by climate change reasonably well and in turn capitalise on the opportunities they will bring about.
"I have belonged to Greenpeace for 30 years, so it's not like I don't have sympathy with today's climate activists"
However, he expresses concern over what insurers are expected to do to drive change and the methods being used to pursue this agenda, specifically protests and demonstrations targeting insurers.
"I have belonged to Greenpeace for 30 years, so it's not like I don't have sympathy with today's climate activists. But I do object to threats and I will always keep client names confidential, so I don't love the move of the market naming and shaming companies.
"In trying to create a good company with good people, we have no desire to be associated with the world's worst polluters, so we are happy to play our part in driving change."
The future
Watson explains launching Inigo in Bermuda was an option prior to its launch in the London market. Even though he describes the island as a "great marketplace", remaining closer to home is the firm's immediate strategy.
"Overseas expansion of any sort can be a long road to profit and the last thing I want to be is a subscale generalist with offices dotted round the world; this would feel more like a vanity project.
"Teaming up with London brokers is proving a very successful distribution strategy for us and I hope it remains that way."
He is seemingly less worried about the company's size going forward and more about its underwriting ability.
"Clearly scale is an issue, but we will likely control over $400m in our first year and I can certainly see a path to $1.5bn with our existing team and resources," he says.
The overall approach is "underwrite well, back your judgement and the size will be what it will be," Watson adds.
"Clearly the market won't climb forever. Matching rate to risk remains an imprecise science, so knowing exactly when to advance or retreat remains challenging."