Answering complexity with specialty

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The risk environment today is unlike anything many insurance professionals have seen in their careers. The need for customized and responsive solutions for the diverse and complex risk landscape has never been greater. Liberty Mutual’s Matt Dolan thinks his team has the answer

WHEN REFLECTING on over 30 years in the insurance industry, Matt Dolan, president of North America Specialty and Ironshore at Liberty Mutual Insurance, sums up the complexity of today’s insurance market quite simply. “I don’t think I’ve ever experienced a more complex, complicated risk environment in my career,” he said in conversation with Insurance Business. For someone of Dolan’s stature in the industry – he has racked up a host of career accomplishments, including co-founding One Beacon Professional Partners back in 2002, establishing Ironshore's health-care liability practice prior to its acquisition by Liberty Mutual in 2017, and leading the entire North America specialty practice at Liberty Mutual since 2018 – to make such a

Liberty Mutual’s Global Risk Solutions provides commercial and specialty insurance, surety, and reinsurance solutions that help better manage today’s interconnected and complex risks by bringing industry-leading products and risk expertise from across the globe to every client interaction. It provides solutions to the wholesale channel under the Ironshore brand. In business since 1912, and headquartered in Boston, Liberty Mutual is the sixth-largest global property and casualty insurer based on 2021 gross written premium, and ranks 78th on the Fortune 100 list.

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“I don’t think I’ve ever experienced a more complex, complicated risk environment in my career”

MATT DOLAN, LIBERTY MUTUAL

A complex risk environment One glance at the headlines today shows just how intense and interconnected the risk environment is. As the world continues to emerge from the pandemic, its impacts are still being felt. While the US economy roared back to life, it’s now facing surging inflation, while at the same time bracing for a likely recession. Supply-chain disruption is still very much a part of business as usual, and while the pandemic has driven a large share of that disruption, the issue has been compounded by the Russia-Ukraine conflict. All of these events have occurred against the backdrop of persistent social inflation, rising political tensions, declining public trust, shifting demographics, and evolving public opinion. Add to that climate change and the rapid acceleration of technology. Combined, these factors present tremendous challenges in business planning, D&O exposures, reputational risks, and more. The result is a fundamental shift in the way risk is examined and addressed across the insurance industry.

“The carrier industry is sort of inductive,” Dolan explained. “They look to the past to predict the future – that’s been the critical data point, to look at historical patterns of loss, and loss drivers, and what causes those. “But now, the industry is in this period of profound change and complexity. The past is no longer as predictive of the present or the future as it used to be – the historical models need to be balanced with an understanding of today’s quickly evolving risk environment. That requires a contemporary sensibility – it’s arguably the most exciting challenge for people who are trying to think about and manage risk that they haven't seen before at this scale and intensity.”

Dolan gave the example of last year’s Texas freeze – highlighting that climate change is creating disruption in the severity of weather, and when this is coupled with weakened US infrastructure and power-grid vulnerability, it becomes necessary to think about how those elements are converging and to anticipate their impact. “At Liberty, we operate with the mindset that risk is not just tied to one line. It’s critical to think beyond products and instead develop solutions that address the interconnectivity of risks, especially in this dynamic environment. “We leverage expertise in these key risk areas to develop a more responsive and compelling specialty solution for brokers and insureds. That extends across the spectrum of different lines and industries. There are not just E&S buyers, or standard commercial product buyers – insureds have a vast array of risk transfer needs, and we are uniquely positioned to respond to these needs.”

The rising relevance of the surplus market and wholesale channel With many carriers choosing to refine their appetites for certain markets based on economic performance, alternative ways to address risk are moving into the spotlight – with wholesale, programs, and captives among the concepts taking center stage. For Dolan, the wholesale market offers a host of advantages. “The world is an increasingly complicated place, and the risk management challenges of insureds require more customized solutions,” he said. “Wholesalers thrive in complex environments; they understand the markets.” It has been suggested that there is a cyclical element to this growth in specialty – with business often moving into the E&S market as carriers begin to re-evaluate their portfolios. Indeed, according to statistics from the WSIA and the US Surplus Lines Service and Stamping Offices, the E&S markets grew by 22 percent from the first half of 2020 to the first half of 2021. However, Dolan believes it’s more than just a cyclical impact – instead, he suggested that it represents a secular, structural change as the complexity of risk has changed to such an extent that the present environment can be seen as a new normal. Wholesale can deal with these emerging risks and bring the right solutions to the table. “Underwriters need to respond to this risk environment with carefully considered but appropriately responsive risk-transfer solutions,” Dolan explained. “The world of the E&S specialty market has never been more important.” The impact can be felt across multiple lines, with Dolan pinpointing cyber and property as two classes that stand out as being in particular need of the “wholesale touch,” given the volatility that exists within both. “Cyber is a fascinating and challenging product that is at the center of this emergent risk theme,” he noted. “It continues to evolve and adapt amid a heightened risk environment with ransomware, cyber terrorists, silent cyber, and everything associated with those issues. “To address cyber, you need to be thoughtful and consider the single point-of-failure issues that could affect multiple insureds. There is a need to be fast, smart, and contemporary in your thinking. One of the things we’ve done at Liberty Mutual is to bring in cyber experts with outside perspectives who can inform our transactional thinking and portfolio analysis. They help us think more broadly about cyber risk and how potential exposures ultimately affect our insureds.” It’s a similar approach to the property market, too – where wholesale solutions are gaining greater importance because of the elevated expertise they demand in today’s changing environment. “Given climate change, what we’re seeing is weather events that are hotter, wetter, stronger, and longer-lasting,” Dolan said. “It’s harder, and undebatedly more expensive, to stand organizations back up after an event, particularly in this inflation-led economy. So it’s important to come together – retail broker, wholesale broker, and carrier – and help insureds manage their risk.”

“In our specialty lines, the expertise of our people is second to none. That’s what matters most when it comes to delivering in this complex market”

MATT DOLAN, LIBERTY MUTUAL

Winning with a dual-channel approach to specialty solutions Dolan believes he and his team have cultivated a “right to win” based on their comprehensive solutions and contemporary understanding of risk. “Our right to win is being able to represent the really robust collective capabilities of the organization,” he said. “There are very few things the insured is going to be able to talk about in the way of risk that we don’t have a product that can respond to it, and that we don’t have underwriters who are really thoughtful about.

“We have this incredible product suite – but that only matters if we can bring it to insureds and brokers through an interface that’s responsive and service-oriented. That’s what we offer – and the expertise of our people is second to none. The creativity and deep product knowledge of our team really set us apart and allow us to deliver solutions where others may not be able to.” Delivering a dual-channel approach to the specialty market is a key way Liberty Mutual is delivering that responsive interface and demonstrating its commitment to the retail and wholesale distribution channels. “We want to make it as easy as possible for our broker partners to access our specialty solutions. That’s why we’ve made the strategic decision to offer wholesale products under our Ironshore brand — which is already well-recognized and respected in the E&S space. We know our specialty solutions are also critical to the retail market, and those will be offered under the Liberty Mutual brand going forward,” said Dolan. Regardless of the channels through which brokers and insureds are accessing the market, they all need solutions to the accelerating risks we’re seeing today. And Liberty Mutual has been bringing that to life across the full spectrum of risk. Ultimately, Dolan emphasizes, this unique risk environment is characterized by the need for bespoke, responsive, and contemporary offerings. Liberty Mutual aims to collaborate with its partners and think creatively to address the most complicated risks. And what, as Dolan says, “could be more compelling than that?”

6th largest P&C insurer globally (based on 2020 GWP)

4th largest commercial lines writer in the US

#78 – Fortune ranking based on 2021 revenue

45,000+ employees worldwide

Over 110 years of experience

29 countries and economies around the world

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