Fri | Oct 23, 2020

IronRock warns of market fallout - Says more bad things to come from COVID

Published:Sunday | September 20, 2020 | 6:33 AMNeville Graham - Business Reporter
Managing Director of IronRock Insurance Company Limited Evan Thwaites.
Managing Director of IronRock Insurance Company Limited Evan Thwaites.

General Insurance company IronRock is still a young buck in a market that it entered as a start-up over four years ago with a tech strategy for insurance delivery – a status its founders say has helped it to weather the pandemic, so far.

The young company, co-founded by veteran insurance executive Evan Thwaites, is more worried about the general insurance market, saying the sector’s prospects will worsen as the year rolls along.

IronRock Managing Director Thwaites telegraphed as much to shareholders at their annual general meeting on Wednesday and expounded on it later in an interview with the Financial Gleaner, saying his reading of the market indicates that the rest of this year is extremely uncertain and probably will be negative rather than positive.

With just one per cent market share, and the smallest operation among 12 general insurers, a shrinkage in the market may not stop IronRock from growing but could constrain the size of that growth.

Thwaites said the really risky elements of the COVID-19 pandemic are yet to manifest themselves – a reference to expectations that companies may start exiting insurance arrangements because of falling and failing businesses.

“It’s early days because the bad part of COVID-19 is about to start now. The early part was more smoke than fire, and the fire is going to start burning now,” Thwaites warned.

“The problem is going to be when the commercial entities start to suffer from a lack of tourism, for example. When the hotels are not operating, are they going to cancel their insurance policies and wait until they get some revenue?” Thwaites said in an interview with the Financial Gleaner.

He also noted that stationery and office supplies firms that are now seeing a falloff in sales may be hard-pressed to come up with insurance premiums.

In that scenario, he said, as business declines, insurance companies have to be mindful that the longer the bad times continue, the more likely they are to see a rise in fraudulent claims.

“Somebody who has a car loan, who hasn’t worked for a long time, may decide – we hope they don’t – that it is better to stage a crash, or burn their car, or get somebody to steal it and collect the insurance rather than have the bank repossess the asset because they’re not making payments,” Thwaites said, adding that another danger could be business people, who are almost out of money, going so as far as torching their businesses.

As for IronRock’s own prospects, Thwaites said the company was already tech-driven before the pandemic and so was able to adapt easily to the shift towards online services and transactions.

It is much easier to manage in these difficult times with a small, nimble firm where just a dozen persons are dealing with insurance, backed by a robust IT platform, he noted, saying it allowed IronRock to adapt swiftly and seamlessly to a work-from-home protocol.

Thwaites said the company has “so far, done pretty well out of” the pandemic.

“We were able to leverage those facilities to get a greater level of growth,” he added.

For the six months ending June, IronRock’s gross premiums strengthened 32 per cent year on year, from $318.5 million to just under $422 million.

However, net premiums shrank 16 per cent, from $107.5 million to just under $90 million, due to reinsurance adjustments that the company expects will pay off for them down the line.

“We made changes to our reinsurance programme as at January. We ended up with more reinsurance treaties, particularly of motor and liability quota share treaties, so that helps us to cushion the effects of claims,” Thwaites said.

The new arrangements, he added, are long-term agreements that will allow IronRock to grow more aggressively without having to absorb all the cost of the mistakes in adding new business.

Still, Thwaites has indicated that the company intends to pace itself to avoid any big spike in claims.

IronRock reported a loss of over $11 million at half-year ending June, but Thwaites says the company expects to turn a profit by year end, as it did in 2019.

IronRock is working with brokers to institute payment options for clients while watching receivables. Thwaites also said the company is being careful about how it chooses clients and how claims are adjudicated.