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Howden, the UK insurance broker, has secured £500mn of insurance capacity from a group of Lloyd’s of London firms for a newly launched division that aims to turn tech start-ups into mini underwriters.
The London-based broker, which has grown to 15,000 employees after a spate of acquisitions and hires under founder David Howden, has also agreed its first investment through the new arm, Howden Ventures, in maritime technology start-up CetoAI.
Lloyd’s insurers Tokio Marine Kiln, Chaucer and Liberty Specialty Markets are among those that have pledged to hold the risk for a total of £500mn of insurance coverage written in partnership with these early-stage firms, through Howden’s underwriting arm Dual.
The coverage “is to be deployed across pretty much any type of risk that comes in that we think we want to support,” said Tom Hoad, head of the new division, stressing the extent of the delegation. “That I don’t think has ever been achieved before.”
The division is intended to put CetoAI and other start-ups that offer technologies to the sector on the road to become so-called managing general agents, a business that has authority from an insurer to underwrite on its behalf.
For example, CetoAI will look to marry its services, which provide live data analytics regarding a ship’s systems, with an insurance policy covering the vessel. Hoad said the model could work across speciality lines of insurance, where start-ups’ data edge in niche areas could mean more competitively priced coverage.
The venture reflects the latest attempt to link established insurers with the innovation provided by so-called insurtechs, though delegated underwriting models — which separate those holding insurance risk from those signing the policies — have had notable blow-ups. The billions of dollars of credit insurance covering loans from collapsed finance company Greensill Capital were written through a small, Sydney-based underwriting agency.
Hoad said the Howden platform had a range of safeguards including exposure limits and other governance checks, such as an underwriting committee that includes the insurers partnering with the start-ups.
Industry figures have raised concerns in recent years about the difficulty in bringing forward new insurance products in London, which has ceded ground to other global hubs in areas such as insurance-linked securities.
Hoad, who worked previously on a range of initiatives within Lloyd’s looking to connect established insurers with start-ups, said the goal was to provide an “open” platform for collaboration. “What we’re really trying to do is bring forward the speed to market for entrepreneurs with great ideas,” Hoad said.
Howden will take minority ownership stakes in the groups, and has committed £10mn of funding to the effort. Starting with a handful of deals, tens of start-ups should be partnering with the platform over the longer term, Hoad said.
Howden has grown its broking business in recent years through acquisitions such as rival Aston Lark and reinsurance specialist TigerRisk, as well as hiring from other companies.
But this effort hit a setback earlier this month when Howden acknowledged in a legal settlement with Marsh McLennan-owned rival Guy Carpenter, from whom it had hired around 30 employees, that it had “engaged in unlawful recruitment”.
In a message to employees seen by the Financial Times, Guy Carpenter’s CEO said Howden executives had “acted in blatant disregard for the law by knowingly planning and implementing an unlawful conspiracy”. The terms of the settlement were not disclosed. Marsh McLennan declined to comment.
