A holistic approach to W and I for the SME market

Markel International, London

Markel International has had a strong foothold in the warranty and indemnity (W&I) market for over eight years as a capacity provider on a global scale to coverholders. This strategy has not only proven profitable – having backed high-conviction segment specialists – but it has also yielded a sizeable dataset and collection of insights to be harvested. In early 2020 and in line with Markel’s ambition to be the market leader in its chosen niches, the organisation reached an inflection point after identifying the SME segment of the W&I market as an area ripe for growth. And with all the resources to bear and with a long-term commitment secured, it was time to capitalise on this growth opportunity.  

To support Markel’s plans and ambitions, the organisation appointed Bryan Dressler as a senior underwriter and head of W&I for its professional and financial risk (PFR) division. Since starting in the summer, he has been responsible for developing Markel’s new W&I business line tailored for SME targets domiciled in the UK and European Economic Area (EEA). “Markel and I saw eye to eye that the part of the market best suited for product growth and a data-driven underwriting model is the SME space,” Dressler explained: “There’s a lot of deals, it takes less limits, and you can narrow your focus, which allows you to build a diversified portfolio at scale informed by principled underwriting.” 

Before starting at Markel International, Dressler was an assistant vice president leading the Transactional Risk Insurance Products team at Arch Insurance. Prior to that, he spent six years with JLT Speciality both in London and in the United States, structuring and negotiating W&I, tax liability, and contingent liability placements across the world. He started his insurance career specialising in public company D&O in the US with experience across the full suite of financial lines.

With his multi-faceted background as a broker, underwriter and qualified lawyer, Dressler is well-positioned to take Markel’s product forward to the W&I market: “I first saw insurance through the lens of public company US D&O. It’s time to marry the legal agility of W&I with the lessons learned in more engrained lines of insurance, and you can only do this at a place like Markel with its reputation, access to data and underwriter empowerment.” Dressler added: “As a qualified lawyer, it’s important to be able to speak the legal language in which these deals are expressed, but it’s more important to know what to care about. By putting together a team of complementary’ skillsets – be it financial due diligence, tax specialists or other types of underwriters – we can move fast and clearly. That is, we can underwrite on the offensive, rather than worry and bother our brokers about peripheral technical issues that won’t move the needle but will eat margin,” he said. 

Markel is currently on a recruitment drive to bring in individuals who understand the mechanics of how and why businesses are acquired and whose talents map breach activity. According to Dressler, good progress has been made on the hiring front as Markel International aims to build a team of six in London by 2023.  

Streamlining processes to maximise operational efficiency 
To offer best-in-class service, Dressler has been working closely with Markel’s PDS, IT and actuarial teams to develop a bespoke workflow system to handle the complexities of the W&I business line. Having this in place, he notes, is powerful for two reasons: it allows the organisation to record and track key data points to iterate its underwriting model based on new trends, and it’s a built-in checklist to ensure the key underwriting points are addressed in a high-volume business. “Service and data are how we win here,” Dressler asserted.

He continued: “This will benefit our brokers by fostering a more streamlined and decisive underwriting experience. How you underwrite large deals should be very different from how you approach smaller ones. Our workflow system is built on that premise. Brokers put their integrity on the line when recommending insurers. I know what it takes to do that job. We will avoid surprises, keep the deal on track and hit our deadlines.” 

Protecting insureds against unknown risks
Markel’s W&I insurance line supports funds and corporates selling or buying businesses. The cover offers protection against “unknown risks” after prudent due diligence by the buyer, which can help to bridge differences between the parties in terms of the purchase agreement and get the deal done. Currently, the organisation deploys a line size of up to £25m/USD $25m/€25m for UK and EU targets with equity values up to $300m. 

Stressing the importance of Markel’s W&I cover, Dressler said: “buyers like it because it provides protection from a single secure counter party who’s incentivised to make them whole should there be a breach in a warranty despite their best efforts at diligence. Sellers like it because it frees up their proceeds and makes continuing to work with the buyer after close easier. Our clients tend to be private equity funds and strategic corporates that are conducting M&A in the regular course of business,” adding that counterparty strength and multi-line support should be a top priority for insureds. 

Macroeconomic conditions affecting W&I
On the subject of M&A, there is a question on brokers’ minds about how much of it will happen in any one year, particularly at the moment on the heels of the steep interest rate reversal and the general uncertainty hanging over the economy. However, Dressler points out: “There seems to be a strong secular trend in favour of private company M&A, which W&I feeds off of, and those tailwinds aren’t going anywhere – there’s dry powder to spend and there’s value to unlock. It’s especially true of SME M&A which is less reliant on debt financing and which is constantly turning over as people build their businesses.” He expanded: “We’ve seen W&I grow up over the last 10 years to the point where it’s engrained in much of the M&A community, but there’s still a lot of the pie to grow when it comes to SME deals being insured.”

Regardless, Dressler and his team have their fingers on the pulse of M&A, remaining in regular contact with lawyers, due diligence advisers, and investment professionals to gain a better understanding of what people are doing well in W&I and what can be done better.

Here for the long term
Looking ahead, the message to Markel’s brokers is clear: Markel is “not dabbling” in its approach to W&I and is in it for the long haul. “We have a book of coverholder business that has and can stand on its own and those relationships are very important,” stressed Dressler, “but Markel is as advantaged as anybody to offer a unique W&I experience in the SME space for our brokers and their clients. We have the data, we have the resources to clean it, we have the people to put it to use and we have the commitment of an organisation that is very good at what it chooses to do.”

With 2023 fast approaching, Dressler and his team look forward to delivering Markel’s long-term W&I offering, while hitting the organisation’s goal of underwriting up to $30m gross written premium (GWP) in this area by 2025.

For more information on Markel’s W&I insurance cover, contact bryan.dressler@markel.com

About Markel International:

Markel International is a division of Markel Group Inc, a US-based holding company trading on the New York Stock Exchange (NYSE: MKL). Markel International writes insurance and reinsurance business through six divisions and through offices across the UK, Europe, Canada, Latin America and Asia Pacific. Markel International’s insuring entities include Syndicate 3000, Markel International Insurance Company Limited, Markel Insurance SE., and Markel Resseguradora do Brasil S.A. Its UK national markets business also provides legal and professional fees insurance cover as well as legal and tax consultancy services.