Stephen Catlin points to 'vacuum of leadership in the London market' as he launches latest venture

Convex is touted as a global specialty insurer and reinsurer, concentrating on high-value and complex risk. Catlin says that it will not write commodity business.

It has raised $1.8bn (£1.4bn) in initial capital, with $750m coming from cornerstone private equity investor Onex.

Catlin, pictured left, founded the Lloyd’s insurer that bore his name in 1984, selling it in 2015, which was in turn acquired by Axa last year. The Convex management team features a number of former Catlin executives.

Speaking to Post about why he had chosen this moment to reenter the market, Catlin said: “There’s a vacuum of leadership in the London market. There’s a vacuum of leadership in the Bermudan market.

“When we were running our own Lloyd’s syndicate, we led over half our business there, and I think both clients and distribution enjoyed our leadership and will want to see it back in the market. We’ve got a captive audience before we start.

“We took the decision at the end of March last year. Paul [Brand, Convex deputy CEO] and I had to take a view as to what was going to happen to the industry, and our view then was it could not go on as it was. It was going to have to move from headwinds to tailwinds, which has actually clearly happened across most of the market, though there’s a long way to go in terms of the correction. We’re not there yet.”

Catlin identified the June and July reinsurance renewals as “the obvious place to start” for the new venture, saying that while it would begin to write some direct business, underwriting will begin in earnest next year.

“From a licensing point of view, and I agree with the regulator on this, they don’t want us writing business until we’ve got the expertise to write it,” he said.

“For us, this year is about building the toolkit for the future. Most of the people we want to employ are on six months’ notice, so we’re not going to be fully kitted out until November this year. While we’ll write some business this year, the real drive in earnest will come in 2020.

“We’re going to have to been quite careful and mindful this year so that we don’t overstep the mark in terms of our capabilities.”

Citing the high costs of doing business in London, Catlin also said that Convex intends to horizontally outsource all of its back-office processes, which he predicts will save the new company around 3% on expenses, which he equates to nearly a 5% ROE.

Lloyd’s

Despite Catlin’s previous heavy involvement with the Lloyd’s market, there are no immediate plans for Convex to enter One Lime Street.

“Paul Brand and I are great supporters of John Neal [Lloyd’s CEO] and Jon Hancock [Lloyd’s director of performance management], and the combination of those two with Bruce Carnegie-Brown [Lloyd’s chairman] gives Lloyd’s the best opportunity to be relevant in 10 years’ time that it’s had in some time,” he said.

“John [Neal] would like us to be in Lloyd’s, but we can’t really see how they could possibly give us a business plan that would work for us while they’re trying to clear out all the dirty washing,” he continued, referring to a rigorous performance management being pursued at Lloyd’s as it seeks a return to profitability. 

However, Catlin didn’t rule out entirely the possibility of entering the Lloyd’s market at some point: “As much as they’d like to support us, it’s very difficult for them to do it just yet. That means – by implication – that we’re thinking about it.

“I’ve got Lloyd’s going through my veins – I’ve got a huge emotional attachment to the Lloyd’s marketplace, but this is not an emotional decision, it’s a commercial decision, and we’ve got to work through whether it’s in the best interests of our shareholders to have Lloyd’s participation or not and we haven’t made that decision yet.”