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Insurance Insider - Behind the Headlines
Get the inside scoop on the major stories shaping the London Market through discussions with the journalists who broke them with insights from industry professionals on what these developments mean for the (re)insurance sector.
Insurance Insider - Behind the Headlines
Behind the Headlines: Radian’s Rick Thornberry and Richard Watson on Inigo’s ‘second album’
What’s driving the wave of shifting ownership structures in the Lloyd’s market?
The M&A cycle underway at Lloyd’s is reshaping the landscape, with new models emerging. One recent example is the combination of a mortgage and Lloyd’s specialty insurer, following Radian’s $1.7bn acquisition of Inigo.
Radian CEO Rick Thornberry describes it as a “winning combination,” offering non-correlating exposure and an outlet for excess capital. Meanwhile, Inigo CEO Richard Watson is preparing to release the firm’s “second album” – this time with permanent capital backing rather than the uncertainty of private equity.
Plus, Insurance Insider’s Rebecca Perkins unpacks the dynamics in the aviation market ahead of crucial Q4 renewals.
Hello and welcome to Behind the Headlines brought to you by Insurance Insider. I'm Sam Casey and thanks for tuning in to the latest episode. Remember, you can subscribe to the podcast either on our website or on your podcast platform of choice. Some of you might have been listening back in November last year when I interviewed Tony Uzzano of Insurance Advisory Partners, a specialist investment banker who predicted a wave of Lloyd's MA in 2025. His prediction proved correct, and over the last few months there has been a series of deals, most recently the US mortgage insurer Radian buying Inigo. In this week's episode, I am joined by the CEOs of both firms, Richard Watson of Inigo and Rick Thornbury of Radian, to discuss the motivations for the deal and the aspirations for the future of the business. The deal is transformative for the structure of Radian, and in our discussion, Rick Thornbury explains the rationale for the transaction.
SPEAKER_04:Yeah, the greatest synergy, the greatest opportunity is around capital. This was never a focus on finding expense synergies right between two businesses to try to exploit. That's not the strategy. The strategy is to create diversification and to create it in a way that aligns towards a strategy of growth.
SPEAKER_02:First up to our news discussion. Rebecca, thanks for coming on again. Thank you for having me, Sam. So you've been writing all about the aviation market for the last couple of weeks. There's been lots going on. To start off, why is it such a crucial time of year these last few months for the aviation market?
SPEAKER_00:So the final three months of the year are really heavily weighted to airline renewals. I think around 70% of the world's airline renew the coverage in Q4. And with so much business concentrated within this window, insurers see it as their main chance to kind of shape the results for the year ahead.
SPEAKER_02:And why are the risk segments of the aviation market under quite a lot of pressure to get some rate prizes in these renewal supporters?
SPEAKER_00:So there are quite a few factors involved this year. But firstly, we've got reinsurers who are demanding an uplift on rate from primary carriers, and then warning underwriters that failed to deliver, that could mean losing support on their reinsurance panels. So that's kind of one really significant factor at play. And then we've had quite a few significant losses this year. American Airlines, Air India, and that is adding urgency to rebuild some margins within the aviation insurance market. Elsewhere, I suppose Loy's was traditionally an airline market, a lot of business was written there, and they've raised concerns about pricing adequacy. So syndicates that don't improve their results, they could face restrictions. So yeah, against this backdrop, there's quite a lot of factors at play.
SPEAKER_02:And those are all the logical contributing factors as to why rates maybe should go up. As always, insurance has the supply and demand dynamic at play. What are the kind of competitive pressures in the aviation world which might make it challenging to you?
SPEAKER_00:Sure. So again, there's no one answer here. And um, yeah, capacity in the market remains abundant. Um, even after a few withdrawals, there's leverage there for brokers in negotiations. And there's been new entrants and returning carriers, especially in Hull War, which we've seen some new dynamics playing out there, some new entrants undercutting established leaders in the market. And in Hull Wars specifically, um, we understand that brokers and their clients they're pushing for rate reductions of you know 15-20%, which is creating a downward drag on overall pricing.
SPEAKER_02:If we think about the biggest, most dramatic loss event for the aviation market in the last few years is to do with the Russian invasion of Ukraine and the huge numbers of stranded airlines. That's been subject to endless litigation for the last few years. But it largely culminated recently in a ruling from Justice Butcher, which gave a lot of clarity onto how that claim will develop and where it will land. Is the ultimate judgment and as those claims start to settle likely to have much influence on the market in these renewals?
SPEAKER_00:So the UK High Court ruling that put the burden of the seized Russian aircraft onto the whole war market. But despite the judgment, downward pressure on whole war pricing continues because of loss of capacity that we just discussed. And also the market largely sees that outcome already as being priced in after the kind of the sharp rate hikes that we saw in 22 and then 23. And I suppose the judgment just reinforces the need for discipline and closer attention towarding get renewal, but the impact it will have on pricing is yet to be seen.
SPEAKER_02:Well, Rebecca, it sounds like it's going to be an interesting renewal with lots of competing dynamics at play. Thanks for coming on and sharing your thoughts. Thank you for having me, Sam. In previous episodes, we've discussed the structural tailwinds contributing to a period of MA in the Lloyd's market, highlighting the potential buyers and sellers. Whilst Inigo was definitely one to watch, having appointed bankers at the end of 2024, its acquisition by US Mortgage Insurer came as something of a surprise. The mortgage and Lloyd's combination is a rarity in the market, so I'm delighted to be joined by Rick Thornbury and Richard Watson now to explore the motive for the deal and the future strategy for the combined business. Rick, Richard, thank you for coming on the show. My pleasure. Absolute pleasure.
SPEAKER_01:Good to see you again.
SPEAKER_02:And I suppose I should start off by saying congratulations on the deal.$1.9 billion, I believe, acquisition of Inigo after 1.7. 1.7. Um 1.9 if you want to change your mind, we're going to be relaxed about that.
SPEAKER_03:I think is this a negotiation?
SPEAKER_02:You were doing a better job than I did. It's a good thing you didn't choose me as your banker.
SPEAKER_04:We're very excited about it. It's uh been been great to see this come together over the last uh week or so, and I think excited about the future.
SPEAKER_02:It might be good for our audience, Rick, if you just tell us about Radian. We communicate very much with the specialty Lloyd's market here in London. It's not a it's not a huge name for a lot of people. So it'd be good to just hear a bit more about the company.
SPEAKER_04:Yeah, Radian is uh a 50-year-old company, you know, approximately. It's a mortgage insurance company. Today we provide insurance for homeowners who put down less than 20% on their home purchase. So we ensure the credit for the benefit of investors. It's a business that has been around for a long time, but provides an important service in providing people the ability to get their first home, second home without having to save for a 20% down payment. Given the affordability of homes, it's almost essential today for people. So that's our business, and our customers are U.S. mortgage lenders.
SPEAKER_02:It's very different from what Innigo does. We've got here a specialty London property casualty insurer, and it'll make up a substantial portion of the business. It's a big change. When did you first start thinking about this build-out of the company?
SPEAKER_04:It's a great question, and I think we've been on this journey of diversification for the last several years, but the last couple years we really found the path towards looking to expand across specialty insurance lines. You know, through that process, uh, we've gone through a very diligent review and met with a lot of people. Um, and the idea is really to take our mortgage insurance business high-performing, profitable business, generating excess capital, looking for a way to deploy capital creatively, right? And so as we studied the markets and we found the idea of becoming a multi-line insurer, the attractiveness of that, the more we kind of centered in on the strategy, the Lloyd's market became a center of focus because of the capital regime, the regulatory regime, and the way it operates from a risk and return point of view. As we kind of went through that journey of meeting people and learning more about the markets, kind of understanding the non-correlating risk, it became more and more interesting and attractive to us. Then we met my friend Richard here and Russell and Stewart, and it became a reality in the sense of now we can evolve our business, this capital-generating profitable machine, but to create true diversification on a global scale. And that became a reality, really, once we met Richard and the team and started to work together towards what we announced last week.
SPEAKER_02:So and the subject of MA and Lloyd's is something which we've been writing about and expecting for quite a while. And uh Inigo won't be the only um syndicate as much as such that it was for sale. What was it specifically about Inigo, which you're attracted to?
SPEAKER_04:Oh, Richard's probably gonna blush now when I say this, but truthfully, when you look at what uh this team has built over the last five years, you can have nothing but enormous respect. And it's not just what they built from a growth point of view, it's how they did it. It's the culture that they have within this company, which you feel the minute you walk in and meet the team. I I felt it when we met Richard Russell and Stewart at dinner a while back. But you kind of, as you see and feel and touch the company, you find that this is a unique, very talented, very successful group, the highly experienced professionals doing things the right way. And we felt like that matched well with Radiant from a culture point of view and our approach to the business, focus on the customer, focus on culture, focus on data and analytics, and just being very thoughtful from how you approach the business from a risk and return perspective. So again, not a lot of folks, saw a lot of different businesses, very, you know, I like to use the word we were quick to kill in terms of those discussions. But when we came across Inigo and all that we had heard about it, and as we went further with it in our discussions, became a natural.
SPEAKER_02:And to to flip that on its head, Richard, when I think we did a story maybe in December at the end of last year that you'd started working with bankers, and at that point, it it was very much everything was on the table: IPO, different investors, this the kind of bifurcation model we've seen with MGAs and balance sheets. What was it about this radian deal which felt right from the indigo perspective?
SPEAKER_01:Rick put it well earlier. I mean, for me, the biggest single thing was the meeting of minds in terms of culture, in terms of what we wanted to achieve. So for me, it was hugely important that we felt that we had that common aspiration and goal and that we felt we were working with people who felt like they were just part of the team and that they felt as though they were exactly like everything we tried to build. So, from my point of view, the biggest single thing was the cultural match. The fact that there is no clash in terms of, you know, offices, people, lines of business, and if anything, there's the exact opposite, there's the potential for some capital synergy. You know, that to me was an added benefit. But the real selling point was the culture. And I would say that if you looked at that first meeting, that first dinner we had, if you'd said to the three of us, do you want to do the deal, we'd have signed on the spot there and then. So for me, that's the appeal.
SPEAKER_04:Make the appealing was mutual.
SPEAKER_01:So that's a big, big appeal. And I think the other thing is the permanent capital, it is to get off the inevitable element of insecurity of having PE investors. And I would say at this point, a massive thank you to our PE investors because they were there to take a risk on us when we had nothing but a spreadsheet to show. And they've not only been good at helping set up and investing at the outset, but they've also been really helpful in building the business, the advice they've given, the guidance, the ability to just bounce ideas off them. And I think PE can have a pretty awful reputation. But the guys we found were absolutely fantastic. They were a fantastic example of people willing to take a risk and to really invest not just cash, but time and effort in helping to build. So that was great. But inevitably, to find permanent capital is for me such a relief because it means I can get back to worrying about building the business, working with the teams, looking at markets, looking at opportunities, thinking where do we go next? And if I'm honest at a personal level, that's what drives me and gets me excited. It's working with a motivated team of people to capture an opportunity and to try and do something a little bit different.
SPEAKER_02:So we shouldn't expect to see you sail into the sunset anytime soon.
SPEAKER_01:I I'm having far too much fun to sail into as as attractive as the sunset is, uh, it's not somewhere I want to get quite yet. So, no, I think this is a great opportunity. Again, we always talk about the second album, about developing this business, and I think we've done a good job of getting where we've got to, but we've got an opportunity to do a great job over the next few years. And at a personal level, I wouldn't want to miss out on that.
SPEAKER_02:And how should we think about the combined structure of the organization? I know in terms of branding, Inigo continues being Inigo. How does the management team look?
SPEAKER_04:One of the great things about this combination is very little overlap, right? So we have an incredibly talented team on the mortgage insurance side, we have an incredibly talented team on the indigo side, two very different businesses. The complementary opportunity is around capital and capital utilization and capital efficiency, probably overall risk balance from a non-correlating risk perspective. So, from a management team point of view, Richard and I have spent a lot of time talking about this. We look for Richard, Russell Stewart, Craig, the rest of the team here to go full speed at their business, you know, in the way that they've done it to date. Continue to do what you do. In fact, you know, we're having the opportunity to meet with folks here within the office and ask the message throughout. So I think it's continue to do the same. Richard used the term earlier, and he used it with us probably about a month ago, where he said, the team is ready for the second album. I embrace those words. I think for the Inigo team and the management team to do what you do and do what you do well, continue that, and let's pursue that second album, kind of that what's the next five years of Inigo's life look like? You know, when you walk in this place, you have to say, this has been put together in a very thoughtful, caring, and magical way in some ways, Richard, to bring this group of people together, and they deserve the opportunity to continue to pursue that mission. So I want to see the team continue to operate. We're going to support them, we're going to find ways to help them and continue the development of that second album.
SPEAKER_02:And I talked about at the start how this really changes the whole nature of Radian as a business. Yeah. And being a public company, that's something that which you'll have to communicate and sell to your investors. How do you think about articulating that journey that Radian is on to those various stakeholders, especially because the types of business are so different? The specialty market we're in, it's spiky, it's volatile, it's driven by uncertain and unpredictable events, very different from the mortgage space.
SPEAKER_04:For years, I've had investors and analysts ask me, isn't this a natural fit with a specialty insurance business? You know, why are there still monoline MI businesses? And I think in many ways, what we've done is we've taken control of our destiny and we've taken control in a way that truly diversifies our business. You know, the greatest synergy or the greatest opportunity is around capital. This was never a focus on finding expense synergies right between two businesses to try to exploit. That's not the strategy. The strategy is to create diversification and to create it in a way that aligns towards a strategy of growth. So take our MI business today, profitable, you know, great contributor contributing excess capital. Where do we deploy that capital? We found an engine and a team to kind of channel that capital and growth towards, alongside this, you know, very strong MI business. So from an investor story point of view, you can imagine I've spent the last several days with investors and analysts. Feedback's been very positive, and I think positive from a strategic point of view and optimistic about, you know, kind of where we go from here. But the approach we took from the beginning of where we set out on this strategy was discipline, be thoughtful about the right partner that we choose to go down this path with. And again, I go back to when we met Richard Russell and Stewart and spent time with the rest of the team over the last few months. It really is the perfect fit for us, size, scale, it's meaningful enough. And I think investors saw that in our initial announcement and see that in our kind of the dialogue we've had with them.
SPEAKER_02:And with the structure and the capital as well, the way I would look at it is the a challenging theoretical scenario, say, is you have a periodic mortgage crisis in the States, they come along sometimes, and that coincides in a year, say, where a Cat 5 hurricane barrels through Miami. How do you think about how the model works in that kind of scenario?
SPEAKER_04:Great question. And I I could tell you that we've thought about that and actually thought about it from two perspectives, or you know, think about it separately. Each business has the ability to stand on its own through those types of events. So you can go back to our investor days of the past where we presented that kind of stress scenario on Radian's MI business and how we navigate through that. And post-financial crisis, the mortgage insurance business from a capital structure changed materially. And I could spend the next 20 minutes of a podcast talking about mortgage insurance, but it changed materially to make the businesses much more resilient and well capitalized than they were pre-financial crisis. That I think plays well into that kind of single depressed event. Same thing for the way that team here models their business through those stresses, through the combination of their underwriting techniques and their outward uh reinsurance, if you will. So I don't know, Richard, if you want to comment on that. But I we looked at them as almost like instead of saying it's a pylon event, how do the two businesses endure that separately in and of themselves through an event that's non-correlated? It's certainly a corner case kind of situation, but how do the two businesses, and we're comfortable that both businesses stand on their own?
SPEAKER_01:I think from my point of view, we've been trying to, I know we'd have talked about it before, Sammy. We've been trying to build a business here that will be a long-term part of the market. This is somewhere where people can build careers for the next 20, 30 years. So when we look at the business, we look at those extreme examples, the big hurricanes, the big earthquakes. We look at them as being events we need to be able to survive. And we don't need to be propped up outside. So, from my point of view, I think there is a strength and a stability within the portfolio, within the business, within the ways and the levels with which we protect ourselves. So that's not to say that that combined series of events wouldn't be a bad, yeah, that's good. That's a bad day in the office, right? There's no there's no doubt about that. But they are survivable events. And we, you know, we never want to be kind of taking extreme risks where we're betting it all on black and hoping it doesn't come up. You know, those sort of extreme events are ones we plan for as survivable, and clearly we'll want to be there in a position to capitalise on the market afterwards. You know, for me, again, when we've spoken about what the future looks like, I think one of those things will be one of the benefits and the attractions of this deal is talking to people who really understand what risk and extreme events look like. I mean, you've been through some of them, so you know what that feels like. It can be scary. And I do think it's often overlooked, I think, in a lot of companies, where how do your board of directors and how do your shareholders react when scary things happen? They need to be able to say, right, we're going to double down now and take even more risk. Now's the time to really lean in. And that's not obvious. You've seen a lot of hard markets where big things happen and companies freeze.
SPEAKER_02:It's hard to say it in theory. It takes some guts to do the time.
SPEAKER_01:Well, because the one thing I can guarantee you, at that moment in time, there's a lot of uncertainty. And so the one thing you mustn't do is freeze. You know, so I think both of us have kind of been around long enough and prepared enough to know that in those sort of extreme events is the most exciting opportunity. So for me, you know you hope it's a good idea. Exactly. You hope you hope it never happens. But you know, when it does, I'd be very confident that between the two of us we've got the experience to be able to capitalize on that.
SPEAKER_04:Yeah, that I would just add to we went through the COVID event, right? Some of the best business we wrote, just like any cycle management, your business softening, hardening kind of markets, we saw some of the best business we wrote was following the COVID cycle. So we're, I think we're very familiar with kind of understanding where we are in a cycle, when to lean in, and how to manage the distribution of risk. So I would point out, though, in the presentation we did for investors last week, we actually showed the correlation of mortgage insurance to Lloyd's and other specialty markets.0003 correlation, which is zero. That's where it really becomes a corner case. And I've had a number of people ask me that question, and we do look at it in the context of how do the businesses endure that kind of risk together. But it's a great question.
SPEAKER_02:Given that, are you surprised that it's not a really a structure that we see? The mortgage specialties. I mean, in terms of the peer group, Arch have a quite a big mortgage reinsurance dependency, but otherwise, it's a unique structure.
SPEAKER_04:Well, yeah, Arch has one of the is also one of the largest mortgage insurers in the U.S., too, along with their reinsurance business. So I would say they have a model that is similar to this. I can't really respond to what others do, you know, from a from a competitive point of view. But I think for us, as we did the analysis from a diversification capital point of view, there's a lot of financial sense that this makes. And then you have to find the right team to partner with. And because of the newness of this business, for us from a mortgage insurance to specialty, finding the right team to work with was probably the first box to check because we understood the financial and capital side of it. That's what brings us here today.
SPEAKER_02:Notwithstanding the fact that Inigo continues going on itself, it's not one of these mergers where teams are coming together hugely, et cetera. But in any deal and coming together of companies, there's always areas of friction, but it's inevitable. As you think about strategically creating this combined entity, what are the uh risks that you think about as sort of your planning to mitigate?
SPEAKER_04:My perspective is this our focus is, you know, less about integration because there's very little overlap between the two businesses and leveraging the skill sets of both organizations. The natural integrations happen around financial porting and kind of financial practices, but we've spent enough time talking to Richard and Stuart and Russell about that. So I think the risk we run is that if we in some way impede the team's ability to do what they do well and continue that. And that's from an integration risk perspective. I I wouldn't say it's nothing is ever easy, nothing's ever low, because there are things we have to do from a public reporting company. But I think we have a clear line of sight on those activities and feel pretty good about it with the intention. By the way, there's a lot of excitement on the radiant side, so trying to avoid everybody checking their passports and making reservations to come to London.
SPEAKER_02:Yeah, how do you think about it, Richard, when we write about deals? There's always teams look at new opportunities, say, you know, they've come along for the ride of integrated, they've done well, they think what's next. How do you think about building what you've already got?
SPEAKER_01:I mean, I certainly think it's very easy as a business to be complacent, survive the first few years, and suddenly you become ordinary and you become like every other company. I mean, that's filled me with horror from the get-go. You know, let's just never ever put ourselves in that position. So please, please, let's try and keep the excitement and I think we're helped there by the sort of people that we've been lucky enough to recruit. I think by nature they're kind of pretty energetic, pretty dynamic. And I think, you know, on one level we've done well, the business has grown, that's fantastic. But on another level, we're only just at the very beginning of what we want to do. So it doesn't feel like, oh my God, we've tapped out and, you know, we've done it. I mean, we're so, if you looked at us against the list of carriers that, you know, the SP 500 have, we're still somewhere down the list. You know, I mean, I hope we're making an oversized impact in a positive way in the way that we're engaging with customers, the way that we're helping them understand risks, the way that we're adding value beyond just being a transaction. And I can see that and I can feel it, but we're still just at the very earliest days in that journey. So I think from my point of view, people still seem really excited by the prospect of what lays ahead. And I think in the back of people's minds was inevitably going to be the, oh my God, what if we team up with a company that has a lot of clashing lines of business, interests, offices, distribution strategies. Oh my God, how do we, you know, cope with that? I think that's probably been a bigger worry. So I think the way we describe this as the setup for our second album is in many ways such a good description because it feels like we're free now to go and get on with it. We can go and do it now. We've got lots of capital, we've got a partner in Radian and a CEO in RIC who really gets what we do and just wants us to go and do it. You know, please execute the plans that you have. So I think from my point of view, there's always going to be a risk, and you'd be complacent if ever you think, oh yeah, we've done it. But this has been as straightforward a process as I could ever have wished for. And it ticks every box that we wanted to tick. And it leaves us free with the brands, the ideas, the investment in analytics, the investment in engaging with a customer. It leaves us free to pursue that and go and get on with it. And I think I might have mentioned before, it's a risk of repeating myself, but there is this issue of distraction that has been, I think, a major problem for companies over time. And a deal like this definitely allows us to look at a broader stage at what we might want to do going forward. And I think one of the risks might be finding that too distracting from our job of executing the plan and getting on with it. We've got a really good road ahead of us, and can we just get just go and do that without being distracted? So maybe one of the things we have to be conscious of is this is a great deal. We're over the moon to have done it, but let's get back to the job in hand, let's get back to talking to customers, let's get back to finding new ways to look at data, let's just do that stuff really well. So maybe just maybe one of the risks is just the distraction of the deal. But I think this will be really interesting for a week, won't it? And then everybody will move in, you'll interview somebody else, and it'll be a more popular podcast. So, you know.
SPEAKER_02:And Rick, a final question for you. What's the long-term ambition? How would you like Radian to look in maybe five or ten years' time?
SPEAKER_04:Look, we're ambitious. This is a transformative deal for Radian, and I think as well for the Indigo team. I think as we look forward, I think we see the opportunity to be a much more substantial, diversified player across multiple lines of business following the team's lead on where those opportunities are. And I think you take the combination of a strong portfolio on our mortgage insurance combined with an opportunity to invest capital across growing markets. I think that's the winning combination. So I won't make any forecasts towards the future, but I think continuing to be a growing player in the global specialty insurance market, I think that's the opportunity to head. And I think the combination of the two companies puts us in a position to explore that and kind of build on that. We'll tell our story as we go forward here. But I'm personally, it was fun to get to last Thursday after a whole bunch of work and start to tell the world about it. Because, you know, having been through a lot of transactions in my career, as my wife can attest, it's probably one of the proudest days I've had to be able to say, hey, we put these two companies together. Because I think that it really is highly complimentary, highly strategic, highly transformative, and also just good people. And so you can probably tell the chemistry between Richard and I are pretty, it's pretty good, but it's good across the team. And I think we're excited about the future. So without giving you a forward forecast that I'll get in trouble for, we'll just talk about the fact that we're very optimistic and have that ambition to continue to build on the greatness of these two companies.
SPEAKER_02:Well, on that note, I think it's all we've got time for. So it just leads me to say thank you very much for coming on the show. Good to have you here.
SPEAKER_04:Thank you very much.
SPEAKER_02:In other news over the past two weeks, Insurance Insider reported that US retailer Brown Brown is in the midst of a major review of the wholesalers it uses in London, with Howden's large share in particular focus following its entry into the US retail market. In the latest loss to emerge in the political violence space, underwriters are on the hook for a$75 million claim from Heineken brewing facilities damaged by rebel fighters in the Democratic Republic of Congo. And Convex Chairman Stephen Catlin said in a speech that pricing remains robust and warned against broker speak concerning the soft market. That's all for this episode, but we'll be back in two weeks' time.