By Chris Munro

March 26 - (The Insurer) - Industry veteran Stephen Way’s startup managing general underwriter SLW International has already written around a dozen property facultative reinsurance deals, and is now looking for additional lines of business and scouting out potential acquisitions.

Earlier in March, Program Manager reported that industry veteran Way had launched the new venture. Way’s long career includes the foundation of both Houston Casualty Company, which now operates as Tokio Marine HCC, and Houston International Insurance Group, now Skyward Specialty.

In a social media post, Way said that SLW International is initially writing a book of specialty global property reinsurance on a predominantly facultative basis, although it will also write select proportional treaties and support certain program business.

SLW International is initially writing that business on capacity provided by AM Best A-minus rated Fortegra Group of Companies.

Talking to Program Manager in late March, Way described SLW International as “an interesting play”, and laid out the MGU’s plans and the rationale for launching the business.

The MGU’s initial property focus largely relates to Way’s background, with the executive having focused on the sector during his career. As he explained, during his time at both HCC and HIIG, he led the carriers’ property divisions alongside his duties as CEO of the two companies.

“That was something that I did because I enjoyed doing those Fortune 1000-type accounts,” Way said.

He said SLW International’s property fac portfolio will look to support similar accounts.

“These are generally large complicated multinational companies written on a manuscript basis. And I doubt that we’ll write more than 40 accounts in the first year.”

The reason for focusing on fac, at least in the first instance, is two-fold, said Way.

“I’ve always bought a lot of fac; I’m fairly well known for it, and I want to try writing it on the back side to show it can be done profitably.

“And it’s also partly because we’re not ready as an organisation to write a direct account yet. It requires you to have more staff, with actuaries and claims people and systems to deal with it.

“If you write assumed reinsurance, you’re following a ceding company and they’re doing all that work. And although you’re paying larger discounts from gross to net, you don’t have all that added expense,” he explained.

While SLW International is not yet geared to write primary insurance, that does not mean the MGU will never do so, the executive commented.

“I really am a primary insurer. I've always had companies that wrote primary business, and we bought reinsurance to expand our capacity and control our catastrophe exposure,” he said.

As Way explained, SLW International intends to remain fairly small during its infancy in an attempt to “build a small footprint and take advantage of opportunities as they develop”.

But SLW International will not remain monoline, with plans to broaden beyond property.

“I want to do some acquisitions. I've always done acquisitions, and at HCC I bought over 30 MGUs, so I'd like to think I'm pretty good at doing that,” he said.

SLW International is an independent business, and Way said the company will be able to fund any potential acquisitions itself without the need for external financing, although it may do joint ventures, particularly with participating insurance companies.

“I don't want to buy large MGUs. I prefer to buy smaller agencies, particularly ones that are monoline,” he said.

“I want to buy a team that focuses on one line of business that they’re really good at. And I want to buy small companies that can grow in a disciplined fashion over time. Rapid growth is not a requirement.

“That's what the private equity guys are looking for, and they're not going to be interested in the smaller operations that I'm interested in, which means there'll be less competition,” he explained.

Way said one of the biggest potential challenges he could face is convincing an MGU to sell when they are still in the buildout phase.

“I understand that, so perhaps I can help in that manner by providing financing for working capital which later leads to an acquisition.”

While Way highlighted his track record of buying MGUs while at HCC and HIIG, he acknowledged that the market has evolved since then, with one major difference being the significant increase in valuations.

During his time at HCC, MGUs “were a lot cheaper to buy”, Way said.

“We started the trend long before it became popular with the advent of the private equity firms.

“The price of MGUs has gone way high because of the private equity market coming in, as they're all so totally leveraged that they can afford to pay over the odds,” Way noted.

“When I was doing it (at HCC) we were making acquisitions at about probably 40% of what they cost today. It was a lot cheaper. And we were an insurance company and could not hold the goodwill on our balance sheet or use too much debt leverage, jeopardising our very high AM Best and S&P ratings.”

Given his experience and background in the industry, Way is confident he can secure the paper needed for SLW International to write business, and the potential reinsurance support to back that issuing carrier.

“My experience and my record says that we will make an underwriting profit. We're not the private equity-backed type which is just grow at any cost and regardless of market conditions.

“This is my approach. I'm excited about it. I'm not in a hurry, and I intend to make an underwriting profit. I don't want volume, I want quality.

“We will just take it easy and won’t grow too much in one year. We are not in a hurry, there's plenty of time.”

Way said he has not set any premium volume targets, or highlighted a specific number of acquisitions to complete by year end, noting that pushing to meet such schedules usually ends badly.

“You can have a thought about the volume, but you can't hang your hat on it because if it's underwriting, you'll end up writing things you really shouldn't write just to get the volume, and I don't do that. And if it's acquisitions, you'll buy things that you shouldn't buy.

“I know what I'm looking for and will be patient to find it.”

Way’s career stretches back over 60 years to when he first joined Willis, Faber and Dumas in 1964.

He founded HCC in 1974, before leaving the business in 2006. The following year, Way launched Southwest Insurance Partners which would ultimately become HIIG in 2010.

Way, who was the largest individual shareholder, left HIIG in 2020 and was succeeded as CEO by former The Hanover and Crawford & Co executive Andrew Robinson. HIIG rebranded to Skyward Specialty in 2020 and went public in January 2023.

After acting as a consultant for Skyward Specialty for the past few years, Way is returning to the market full-time with SLW International.

“I don't want to play golf all day long, and I've travelled all around the world several times. I like to work, and I like doing deals, so I will work until I'm unable to because I enjoy doing it. I believe staying busy with an active mind keeps you young, and anyway I think people retire way too early these days.”