DUAL North America: Diversify and conquer

The below interview was conducted by David Bull, North American Editor of The Insurer. It was originally shared on The Insurer's Program Manager publication here.

DUAL’s scaled diversification and “underwriting first” approach is creating significant growth opportunities for the MGA platform and its carrier partners, according to the Howden-owned firm’s North America CEO John Johnson.

DUAL North America (DUAL NA) has been undergoing a meaningful integration process over the last 18 months, with the $800mn acquisition of Align Financial Holdings completing in October 2021 just after the acquired company bought NationsBuilders Insurance Services (NBIS).

At the time, the combined US operations underwrote over $1bn of annualised gross written premium (GWP), or around half of the total at the DUAL Group level, including its international operations.

Since then there has been strong growth, which Johnson attributes in part to the firm’s diversified platform, underwriting track record, role in the larger Howden organisation, and deepening relationships with capacity providers.

DUAL NA ended its 2022 fiscal year on 30 September at $1.45bn in GWP across its 25 underwriting divisions offering around 35 different products. The strong top-line growth was in line with DUAL globally reaching $3.2bn of GWP, including organic growth of 32 percent.

Johnson – who along with current DUAL Group executive chairman Kieran Sweeney came over with the Align deal – says the combination has seen little overlap, with DUAL’s strong presence in areas like financial lines complementary to cat, where Align’s Catalytic is a meaningful player.

The group now has a wide array of product offerings across the combined platform, as well as claims capabilities from Align, Catalytic and NBIS that have been expanded into a number of programs on the DUAL side.

It has also been developing a digital platform that it is actively migrating select lines of business to.

And Johnson believes these have combined to be a driver of growth and put DUAL NA at an advantage in its relationship with carriers and other capacity providers even in a tightening market.

“I think a lot of the opportunity for growth is because of our diversification. We’re seeing more opportunities coming our way. We have a better story to tell because of our diversity across different product lines. We’re not a one-trick pony and there’s more interest in us because of that,” he suggests.

Underwriters first in multi-speed cycle
Having a broader portfolio of programs on the platform is also a hedge against a multi-speed cycle, where different lines and classes of segments are not moving at the same pace.

As an example, the executive points to representations and warranties, which was flying high a year ago but has come down to earth amid the reduced M&A deal flow in the current macroeconomic environment.

In contrast, property cat has “tremendous traction” in the rehardening of that segment of the market.

And here, the “very good” underwriting results of recent years at Catalytic mean the cat-focused MGA has been able to hold on to capacity better than some of its peers, says Johnson, with a slight cutback this year coming after three years of capacity growth when others were shrinking.

That left the firm well-positioned and able to more than make up what it lost in capacity through rate.

“We’re underwriters first. We don’t have to be the biggest, but we do want to be profitable and we look at our role as being stewards of our carrier partners’ capital.

“A lot of the growth at Catalytic was based on our ability to show profitability for our carrier partners, and a lot of it was being able to handle our own claims and make sure that by integrating underwriting and claims we learned as we went through different loss events. It’s okay to cut back and shrink a little bit to grow in the future,” he explains.

In casualty lines, DUAL NA is seeing rate increases across most of its portfolio, with the only exceptions where rates are softening being public D&O and workers’ compensation.

“California workers’ compensation isn’t moving like we would expect it to, but that’s the diversity, because each one of those two segments will have their time and that’s when we’ll be able to grow in them,” says Johnson.

Product pipeline
DUAL NA is actively seeking to further diversify its portfolio – last year launching its crisis management team, initially with product recall, as well as introducing political violence offerings, with other products in line to be rolled out.

Johnson says DUAL NA has two approaches to expanding its portfolio.

“We look at what we’re not doing and we spend a lot of time understanding the profitability within that segment to decide whether it is the right time to enter. And then it’s always talent-based,” he explains.

A case study is the firm’s five-year assessment of the builder’s risk space before making an underwriting entry.

“The rate levels and the sustainability of the product just weren’t there, but then there was a shift in the market and the rates started coming back and we said, ‘Okay, we’re going to engage in builder’s risk and build out that team.'

“So part of it is understanding where that product line is in the market cycle, and the most important thing is identifying talent. You have to start with a talented underwriter,” he adds, with new products only considered when the two coexist.

The DUAL-Howden effect
Being part of a larger MGA platform in DUAL – and the broader Howden Group – means access to a range of capabilities that include reinsurance broker and capital advisory firm Howden Tiger and the recently launched SabRE MGA/programs-focused unit.

“Now being part of the greater Howden network we’re a bigger part of the conversations where before one of us had to be in the room to be in the conversation. The group talks about all the things DUAL brings to the table that are unique to the program space and we’re getting into different doors than before.

“There are a lot of new openings and a lot of new conversations, and having control of $1.5bn of premium we’re much more interesting to carrier partners, because we can do more,” he says.

For DUAL NA, there is also the potential for greater access to other sources of capital looking to enter the MGA and program space, because of its product innovation and access to insurance risk, which makes it an efficient path to get closer to the customer without the restriction of a single balance sheet.

And the MGA platform believes it is strongly placed to attract capital providers.

“We have demonstrated growth and demonstrated profitability – and that’s something they don’t always see in the MGA space. So there’s growth, and then there’s diversified growth, and I think we’re one of the unique players that bring diversified growth to a carrier partner,” Johnson suggests.

This is increasingly leading to strategic conversations with carriers to support DUAL NA’s goal of always doing more than one program with a carrier partner.

“Our weakest relationships are those where we only do one program; our strongest are where we diversify, and we have three, four or five different relationships across the group.

"So it’s not dependent on one line of business again and again. There’s not so much pressure on the relationship when you grow and shrink for the right reasons,” he observes.

Johnson also believes that the story the firm can tell carrier partners is unique because of its ownership by Howden – an organisation that doesn’t have US retail insurance broking operations and is privately owned, including around a third by employees.

“How do we attract talent? How do we bring in carrier partners? We’re all invested in the story and we’re excited to tell that we’re owners of our business, we control our destinies and we’re entrepreneurs. That’s a big part of our culture.

It’s a story carriers aren’t hearing a lot. A lot of times they hear, ‘I want to replace a program’, it’s not, ‘Hey I’ve got a new innovative program I’m going to bring you and if you do this one I’ve got two more that I’ll bring you to follow up.’ Carriers want to hear that from their MGA partners because the MGA space is probably about the most innovative right now in the US,” he continues.

Talent trap
If identifying talent is one half of the equation for DUAL NA in identifying new program opportunities, then the firm believes it is well-placed because of its ownership and diversification to tap the migration that’s been seen recently from carriers to MGAs.

Each of its 25 business divisions is led by what Johnson describes as an entrepreneurial underwriter.

“We think of our business with an entrepreneurial mindset and I think talented underwriters are leaving carriers because they have the opportunity to come into this entrepreneurial business. Joining a platform like DUAL takes the risk out of doing their own start-up, so they have all the accounting, compliance, legal and operational infrastructure they need and they can do what they do best, which is to be underwriters and entrepreneurs,” he comments.

Key to that is empowering underwriters to create the kind of business they want to create.

“They also realise that the greater diversity of DUAL brings tremendous power to the table. So if they ever need capacity, if there's an appetite change at the carrier, there could be a leadership change at a carrier, there could be something that triggers a need for new capacity.

“And now you have the whole power of DUAL working for you so it's kind of the best of both worlds that you're and entrepreneur, you're building your business, but you've got this big umbrella over here that's kind of protecting your interests and making sure that you're not out on an island," says Johnson.