Zurich Financial alumnus Mario Vitale took a spot on Aspen U.S. Insurance’s leaderboard as president last week, bearing battle scars of past cycles that give Aspen an edge as it positions for a turn, the group’s chief executive said.

John Cavoores, co-CEO of the insurance division of Bermuda-based Aspen Insurance Holdings Limited known as Aspen U.S. Insurance, said Mr. Vitale has “been through a number of market cycles” in 34 years in the business. “He has made profits through those cycles, and that’s exactly the kind of guidance we need to give our team in the United States as they develop their plans going forward,” Mr. Cavoores said.

Mr. Cavoores, who like Mr. Vitale has more than 30 years under his belt with prior stints at OneBeacon, American International Group and Chubb, spoke to NU’s Specialty Markets Insights a day after Aspen announced Mr. Vitale’s hiring and a day before a new team of surety experts came on board—describing the historical changes in the E&S/specialty business written at Aspen U.S. and the vision for the future.

Mr. Vitale joins Aspen from Zurich Financial Services where he was CEO, Global Corporate. Prior to joining Zurich in 2006, he served with the global broker Willis Group Holdings for six years and as CEO of Willis North America for four, after many years with Reliance National.

“He brings patience. He brings experience. He brings prudence. He brings a great deal of technical strength and a tremendous access to the distribution system,” Mr. Cavoores said, referring to Mr. Vitale’s role as head of Willis’ North American retail operation.

“The timing couldn’t be better to have someone with [his] experience directing our U.S. strategies,” he said, referring to the fact that Aspen plans to become active in the admitted specialty market accessing large retailers and regional producers over the next two years.

Hinting at the surety announcement to come a day later, Mr. Cavoores referred to it as an example of a team-building effort in the U.S. specialty-insurance market that started to take shape in late 2009. Rattling off names of the professionals like Bruce Eisler, who previously ran the professional-liability operation for Liberty Mutual, and Adam Schnell, who had run the New York casualty operation for ACE Westchester, Mr. Cavoores listed these men and the teams they brought with them among six that came to Aspen in just over a year. (See accompanying textbox, “At A Glance,” for the full roster of key hires.)

Michael Toppi, who hails from Travelers Bond and Hartford Insurance Group, is slated to head up the new commercial-surety team, which will narrowly focus on the niche of public and private commercial and non-construction surety bonds.

“It gives us some diversification” into businesses that historically produce the best underwriting returns for insurers, Mr. Cavoores said, not just referring to the addition of the surety group but also to the staffing of professional-liability, excess-liability, management-liability and marine businesses over the last two years.

“We want to have a very specialized grouping of businesses—businesses that run countercyclical, but also those where you have to be flexible enough to move when the market is changing,” he said.

Mr. Cavoores said Aspen has been writing primary insurance almost since its start in 2002. While the overall size of Aspen’s insurance business was just shy of $1 billion in premium in 2010, the U.S. component remains small—at just about 15 percent of the total, with the rest coming from a London-based specialty operation.

(Aspen also wrote about $1 billion of reinsurance premium in 2010.)

Heading the insurance operation in London is Co-CEO Rupert Villers, a veteran who co-founded Novae Holdings operating at Lloyd’s, who joined Aspen in April 2009.

“The emphasis from the beginning has really been to write E&S, mostly property and general liability,” Mr. Cavoores said, noting that in late 2009, the management team decided “it was the right time to rebrand what we wanted the company to be in the United States.” That would mean building on the success Aspen had achieved on the E&S property side, revamping specialty casualty and adding professional-liability expertise.

GOING AGAINST THE FLOW

Asked why Aspen is ramping up in the U.S. insurance segment as competitors like RenaissanceRe pull back, he said Aspen’s activities don’t represent “a traditional insurance ramp-up.”

“It’s quite the opposite. It’s just investing capital, investing in people—entering with a toe in the water rather than both feet and positioning the company to do well,” he said.

“We’re actually being very prudent in our growth strategy,” he continued, explaining, for example, that in lines such as directors and officers liability, Aspen currently writes excess layers but is poised to move aggressively down to primary layers when pricing makes sense.

Mr. Cavoores said Aspen does not have a specific target for its mix of U.S. specialty business among professional-liability, property and casualty segments. “We don’t think of the business that way,” he said. “We tend to think of the business in a more opportunistic way.”

“We try not to say here is point A, here’s what we want point B to be and we’re going to get there no matter what,” he said. “I think that’s what differentiates us from our competitors. The three people who are running this insurance business have enough scars on our backs to know when it’s time to pull back and when it’s time to be a bit more aggressive,” he added, referring to nearly a century of market-cycle experience that Mr. Cavoores, Mr. Vitale and Mr. Villers have between them.

Although Mr. Cavoores spoke about a high-excess-layer strategy for the current market, he said that didn’t mean the sole focus of the U.S. insurance segment is large-account business.

“We’re not going to be a market for the really small risk; however, we do write property program business,” as well as some smaller casualty programs, he said.

He also explained that Aspen is not investing in the kind of infrastructure an insurer needs to support really small business. “So it’s probably safe to say we’re in the middle market and some of the larger risk tiers going forward.”

REMEDIAL ACTION REQUIRED

Although Aspen ranked as the 34^th largest U.S. E&S insurer on an NU ranking based on premiums written for the first nine months of 2010, getting to $127.8 million of U.S. E&S premiums has been a bumpy road.

Back in 2005, Chris O’Kane, CEO of the holding company, told NU about the group’s earliest forays into the U.S. E&S market—writing small nonadmitted property risks including vacant properties (with a typical limit of $5 million) and what he termed “the lighter end of casualty.”

In 2008, Nathan Warde, then president of Aspen Specialty (who has since moved on to a position with Markel Corp.), was talking about rebuilding efforts and a changed risk appetite that would de-emphasize a dominant book of unprofitable primary habitational business (including garden-style apartments and condominium properties). At that time, he said Aspen put plans in place to diversify the property book and to bring a “specialist underwriter culture” to casualty areas like professional liability.

Fast forward to the end of 2009, and Mr. O’Kane was detailing losses in the U.S. casualty insurance arena. U.S. insurance has “been the least successful thing that we've done, and in some places, it's been unsuccessful,” he said, referring, in particular, to a contractors book in New York.

In early February, during a year-end 2010 earnings conference call, Mr. O’Kane told analysts that Mr. Cavoores had taken “strong remedial action” on the U.S. casualty insurance business that was “not achieving acceptable results.”

Mr. Cavoores explained that Mr. O’Kane was again referring to that N.Y. contractors book and to residential construction business on the West Coast—both of which Aspen has stopped writing.

“There was a point in time in the market when the pricing on that business was actually okay, but the exposures [ultimately] didn’t really match the pricing no matter what you charged,” Mr. Cavoores said. “At the end of the day it’s safe to say it was a mistake doing it.”

“That was really the main event” in terms of remedial actions, setting the stage for a new casualty team to come on board.

With the casualty business shrinking, the majority of Aspen’s growth in the United States over the years has come from the property class, Mr. Cavoores said.

According to a recent NU analysis using Highline Data, a data affiliate of National Underwriter, Aspen sprinted up U.S. E&S insurer rankings, tripling its E&S writings for the first nine months of 2010 compared to the same period in 2009.

The casualty business represented 15-20 percent of the 2010 U.S. insurance total, Mr. Cavoores reported. Within casualty, he said, there was some specialized casualty business, like a successful environmental E&O product, that has now been moved over to the professional-liability team.

DISTRIBUTION STRATEGIES

All of Aspen’s U.S. insurance business so far has been written on an E&S basis, primarily through the larger national wholesale brokers, but that will change in the years ahead.

After acquiring an admitted insurer last year, Aspen now has more than 30 licenses to write admitted business as the company goes through a filing-approval process, Mr. Cavoores said.

Responding to the question of whether he foresees Aspen working through some of the bigger national retail brokers, given Mr. Vitale’s relationships in that part of the distribution chain, Mr. Cavoores said that will happen.

“We have obviously been working primarily with the larger E&S brokers, but as we become more visible in the admitted market, it’s pretty clear that in certain lines of business you need to be in business with the top brokers,” he said, adding that “there is a pretty significant regional penetration” that can also provide the business Aspen is seeking to write—both wholesale and retail.

“It won’t be a massive effort to appoint and work with thousands of brokers. But I think we’re going to be very selective and make sure that the brokers we’re working with want to be partners with us, and that there’s business available that helps us meet our financial objectives,” he said.

On the wholesale side, Mr. Cavoores said that Aspen has recently cut the number of partners in the casualty area, but that Mr. Schnell and his team bring new relationships that will lead to new appointments.

Special Reports /

Aspen Adds Mario Vitale To U.S. Talent Roster

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