Kuhn: Westfield approaching growth cautiously after hitting $1.6 billion GWP and amid rate softening

By James Thaler

May 22 - (The Insurer) – After scaling to $1.6 billion in premium at a 93% combined ratio in 2024 within three years of launching, Westfield Specialty president Jack Kuhn has said the carrier is approaching growth cautiously as rate softening accelerates across different lines.

Kuhn made those comments in an interview with The Insurer TV at this month’s RIMS Riskworld conference in Chicago, where he laid out the thinking behind the M&A that has contributed to the firm’s rapid growth, which has included a number of renewal rights deals.

This past January, Westfield Specialty struck a renewal rights deal with Argo for its admitted retail business for both public and private management liability, financial institutions, architects and engineers professional liability and accountants professional liability.

Kuhn said Westfield isn’t overly concerned about top-line pressures caused by rate softening in management liability and other classes that have led some firms such as Argo and Markel to take varying steps to scale back their presence.

“First, I think, we have very deep talent within that space,” Kuhn said, commenting specifically about management liability as well as the January renewal rights deal with Argo.

“I grew up in that space myself, so I'm very familiar with it. I see it as an opportunity that we're not necessarily competing in the open market to try to get on programs, but we now have an opportunity with existing relationships to take over certain positions on larger accounts.

“So, to me, it's an easier ‘in’ for us. When we originally started in 2021 and our first three-year plan, as we hit 2024, we were probably 50% of the original plan we had in place because the market conditions had moved away,” Kuhn commented.

“We intentionally hit the brakes, making sure that we were building it the right way, focused on profitability and not focused about what the top-line number needed to be,” he continued.

“Now the renewal rights deals have accelerated that because it's given us an entry into a relationship with a client and with the brokers,” Kuhn expanded.

Kuhn said that clients are looking for “stability,” which Westfield can bring, and that he and his team are able to look at the expiring terms and conditions and make any needed adjustments in order to bring the accounts to profitability.

‘VERY STRONG OPPORTUNITIES’ IN CASUALTY

He noted that carriers, including those that have recently posted reserve charges, have become increasingly “skittish” about casualty, acknowledging that “a retrenchment” is underway that is providing Westfield with “very strong opportunities.”

“We're seeing rate in that line of business. We've seen rate in that particular area for the E&S excess since 2017, and it hasn't spiked like the property did or hasn't spiked like you mentioned with the D&O. It's been a more consistent rate approach over the years,” he commented.

Kuhn added that while Westfield is “very happy” with trading conditions in casualty, he has been struck by the sudden apparent reversal in property.

“It's like another segment of the industry that we just cannot stand to have any prosperity in the line of business. We always have to look to see how we can undermine that,” Kuhn said of property.

He also said that Westfield Specialty’s focus has always been about “profitability first, not really driven by top-line growth.”

“That's the wonderful thing about being part of a mutual with Westfield. There's not as much pressure on growth.

“I think they've been surprised at what we've been able to do with the growth that we've been able to generate, but more importantly, the profit that we're able to bring to the organization,” Kuhn explained.

Commenting on the cycle, the former Axis and Sompo executive said that he has observed “smaller market changes than the big market changes” than seen in previous generations.

“I think the issue is there's an abundance of capital that easily can come into the marketplace, unlike it had for 100 years before that. So, I think these market cycles are more focused and shorter in the sense of what we've been experiencing through history,” Kuhn said.

Against the backdrop of the RIMS event, Kuhn said Westfield makes sure it is “very clear” in how it delineates the way it trades between the retail and wholesale markets.

“It's a balancing act, because the wholesalers are expecting to be protected (from) having business pulled out and go back to the retail side, but they want to make sure that they're trading with people that value their proposition that they're bringing into the market.”

As conditions soften, he also expressed caution about MGAs as a distribution channel.

“I'm very cautious about that, just making sure that the interests are aligned. I think it’s just going to be a little bit more challenging as you enter into a softer market,” he explained.

“There's more pressure because they're really driven by their commission income on writing business, not as much on the profitability of the portfolio,” Kuhn continued.

“And that's not the case for every MGA, but that's the one thing we look at to make sure we have alignment on,” he added.

Watch the full interview with Westfield Specialty president Jack Kuhn to hear more on:

• How the insurer thinks about growth after hitting $1.6 billion in premiums a 93% combined ratio

• The thinking behind its management/professional liability renewal rights deal with Argo

• Westfield’s effort to clearly delineate its distribution strategy to “protect” wholesalers

• Why MGA business might be harder to justify amid softening conditions

• The “very strong opportunities” Westfield is seeing in casualty as other carriers retrench

• And more…