John Cavanagh: Co-founder Beat Capital on supporting entrepreneurial underwriting at Lloyd's

Proving that it’s never too late to start a new business, John Cavanagh retired as CEO from Willis Re in 2017 to set up Beat Capital with Tom Milligan (previously Co-CEO of Ariel Re).

Today Beat Capital is supporting multiple underwriting businesses, set up by experienced and entrepreneurial underwriters.

John has been working for over 45 years in insurance, including 21 years at international specialty reinsurance broker RK Carvill where he was joint CEO. In addition to running Beat Capital, John is Chairman of Slipcase, founded by Alex Hearn.

It was a real pleasure to speak to such an experienced and well known figure from the global insurance market.

This wide-ranging discussion includes:

  • The importance of Lloyd’s in the global insurance market
  • The balance between using analytics and underwriting intuition
  • The role of the new “Syndicate in a box” at Lloyd’s (and what that actually means)
  • Why John got involved with Slipcase and why what they do is so relevant for insurance
  • Getting the right work-life balance

John, what’s it like running a start-up again?

I wasn’t ready to retire full-time after Willis Re and felt like doing something quite different. I’ve always been a great fan of my partner at Beat, Tom Milligan. We’ve got very different skill sets, but a shared belief that there was a lack of opportunities for young, talented entrepreneurs within the global insurance market.

We’ve created an incubator platform that allows entrepreneurs to start their own businesses. We give them significant equity, freedom to run their own business, and we provide them with infrastructure, guidance and support, and capital.

Initially, you were attracting underwriters that had existing relationships. Are you prepared to incubate people with good ideas but without a strong, established network?

The initial model was based upon finding top underwriting talent that wanted to start their own business. That was an easy place to start for us because we knew where the talent was.

We’re looking further afield at opportunities outside established underwriting, so we will look at portfolio risk and fintech opportunities. We’re working on one right now where we’re combining loyalty structures with insurance risk and distributing using the loyalty product.

Can you explain more about your loyalty product?

The loyalty phenomena has been around for a long time, but it’s never really been adapted to insurance. We’re looking at a particular market where the brokers are struggling to survive because the insurance companies in that region are going direct on home, auto, and SME.

It’s a pretty well-trodden path but, like most things, the insurance industry has been very pedestrian in adopting some of these technologies, but we think that this one has got real legs.

 You’ve said you couldn’t have set up Beat the way you wanted anywhere else but Lloyd’s. How well do you think Lloyd’s is handling the challenge of allowing entrepreneurs to flourish?

If you look at the demographics of companies in Lloyd’s now, two-thirds of the market are global participants with no head office in London. There should be a balance in there of people that are predominantly focused in London and Lloyd’s, but there’s been too big a swing the other way.

The way we adjust that is looking at the grassroots level for entrepreneurial start-ups to start rebuilding that market profile. When you look at some of the great names in Lloyd’s, going back to the Hiscox, Catlin, Beazley, etc, they all started as very small start-ups in Lloyd’s.

Most people agree that Lloyd’s Blueprint One is a good plan, but what are the critical components that Lloyd’s need to get right to make a true impact on the market?

Practitioners need to get with the programme. We’ve been very good at moaning about what’s going wrong within the corporation, but we’ve got great leadership and things that we can work with.

What Lloyd’s is trying to do is open more avenues of accessibility and we need to embrace that. As practitioners, we need to look at ways we can use some of the ideas on the table. Our view is until we try one, we won’t know, and we are going to try one.

Are you seeing underwriters out there that can be the Stephen Catlin or Robert Hiscox of the future? People who can become leaders on a global level.

I’m inspired by some of the talent that has come through our doors. We’ve seen over 120 plans from people looking to want to start their own business, so the very fact that these people are out there looking to do something on their own is very brave.

At the very sharp end of our market, younger people coming through have had a good grounding and good training with some of the bigger syndicates. They’ve also got a real sense of risk-taking, of enterprise, of business per se, not just head down underwriting. They understand the concept of business, which is important.

Everyone recognises that data is really valuable, and analytics are important. But we’re starting to see a theme where the requirement to rigorously analyse risk is becoming over-prescriptive in terms of how people make decisions. Are you seeing underwriters in the market that are able to make good underwriting decisions without having all the data?

Analytics have brought such phenomenal insight into risk-taking. When I began my career there was no analytics data. When I left Willis Re there were 200 analysts and they were a fundamental part of what we delivered.

However, instinct in underwriting is still very important because sometimes the data only tells part of the story, and then you’ve got to trust your judgment. It’s still a combination of the two, but we’re a better-informed world than we’ve ever been.

When you look at opportunities with Beat, what is the balance between the shift into intangible assets that are harder to understand and analyse, versus doing the existing core insurance?

Writing things like political risk, trade credit, cyber, some of these new lines of buccaneering risk, are very important for us.

Cyber is one of the biggest evolving problems for major Fortune 500 corporations because their machinery stops moving once they’ve been hacked. It’s a really important part of their risk management program and we must offer a product. We need to be there as a market.

You have said that innovation was very important to you in order to be able to compete when you were at Carvill. What is your experience of how large organisations create the space and freedom for people to go and innovate?

There were some very creative people at Willis when I was there, but in the early days there wasn’t an embedded culture of creativity and entrepreneurialism. It’s very difficult to embed that culture in a large organisation quickly.

It’s about making small touches on the tiller in areas where you feel you can make an impact. The big brokers are going through a lot of change now because they’ve hit their market share capabilities and it’s a question of where they go from here. The ones that are using innovation will do better.

You’ve also become the Chairman of Slipcase, which brings together news from the insurance market. What drew you to that business?

I bumped into the founder, Alex Hearn, at a conference. I found he had a great view of technology and how to distribute information through markets. The platform he’s building to inform the market, in a very focused and targeted way is very interesting.

We were desperate for information at Willis Re. You have the insurance publications, but it needs to be broader, focused and targeted. Slipcase have cracked that, or they’re certainly in the process of cracking it. It’s frustrating when you see how progressive they are, compared to some of the technology in our industry.

You’re running Beat. You’re involved in Slipcase. You’ve got a family life. You play in a band. You know how to enjoy yourself. How do you make time for all those things?

I think it’s important to not take yourself too seriously. To make sure you get a good work-life balance and you’ve got to have some fun. Business is a very serious thing, but there are ways of enjoying it and keeping it balanced. I’ve worked very hard not to bring my work home. I just feel that there needs to be off-time and I’m very disciplined about that

When people ask me if they should come into our market, I say, “absolutely, yes.” I’m very happy to say my son works in the market. I’ve had a fantastic time in Lloyd’s in the London market. It’s given me opportunities to see things around the world that I never would have seen.

Podcast from InsTech London found here