Q&A: Dan Fortin of QBE North America
Dan Fortin joined QBE North America as president of financial lines in 2020 and was named president of specialty insurance at the insurer last year. Previously, he held senior underwriting roles at Berkshire Hathaway Specialty Insurance Co. and CNA Financial Corp. Mr. Fortin, who is based in Chicago, recently spoke with Business Insurance Editor Gavin Souter about the effect of recent bank runs on the directors and officers liability market and QBE’s specialty risk strategy. Edited excerpts follow.
How will the disruption in the banking sector affect the D&O market for financial institutions?
The insurance industry, and more broadly the banking sector and the broader economy, just dodged a bullet. Had the government and the FDIC not stepped in and backstopped those deposits we could have had a much bigger issue. It increased the focus on underwriting, but I haven’t seen that translate into any material change in pricing or capacity or terms and conditions. As you think about Silicon Valley Bank, there’s more of a focus on concentration risk and, with the increasing interest rates, concerns about asset-liability mismatches.
The losses for the industry are going to be concentrated in a handful or less of those banks and the organizations that were affiliated with them. At QBE we quickly looked at our portfolio to simulate contagion to see what the impact would be and we view the impact as pretty minor.
How would you characterize the D&O market generally?
Competitive, for sure. The public company segment is the most competitive. You’re dealing with a limited pool of companies, which is more limited since the capital markets really dried up in 2022 relative to 2021. New premium was coming online related to initial public offerings, the SPAC frenzy and even the de-SPACs, and you had a number of insurers coming online with a need to write business, but, since it dried up, public companies started to experience rate decreases much quicker than most people had estimated.
But I would add that the severe decreases were largely isolated to high-hazard companies that were subjected to really significant rates in 2021. You’re still looking at, by most underwriters’ estimates, pretty adequate rates even though they came down from 20% to 10% (rate on line).
If you look at the more traditional D&O market — the Russell 2000 business or the S&P 500 business — those rate decreases are less than the higher-hazard class and I’m not as comfortable with the rate adequacy in that segment because they didn’t go up as much between 2019 and 2021.
Are you seeing many SPAC-related claims?
We fully expected to see a much higher claim frequency, just given the nature of the risks. So, it’s not surprising that we’re seeing more claims in that area than you would see in the non-SPAC area, but, if I consider the rates that we were paid, I still feel really comfortable that the industry in general got paid for the risk. And because these SPACs only bought limits of $20 million to $30 million, relative to a traditional S&P 500 company that buys $200 million to $500 million of limits, the claims aren’t going to be as impactful to the industry overall.
What other areas of specialty risk are you looking to expand into?
We’ve invested over the last nearly a year in the cyber business. In the U.S. and globally, we’ve looked to create a consistent approach to how we pursue cyber business and in our offerings to our insureds and brokers. We expect to accelerate our growth in that area. We’re trying to figure out the whole intellectual property exposures and how we might be able to create some risk transfer products that work for the buyer and the seller, but that’s early days. I look at the IP market as similar to what we saw 20 years ago in transactional liability. I could see (IP) business in 10 or 15 years being a $5 billion to $10 billion market for the insurance industry globally like the reps and warranty business is now.