What’s your remit at REassurance?
As managing director, it’s perhaps to move away from some of the day-to-day stuff that I was doing previously and to take a bit more of a strategic approach. The impetus behind REassurance was really that the whole insurance transactional risk landscape has changed and become a bit more sophisticated. Clients, the legal community and the insurers have all evolved and we want to offer a more personal, solution-driven brokerage.
There’s a short-term goal, which is to establish ourselves within the CEE real estate community, because that’s where the team’s strongest relationships currently are. The medium-term plan is to expand the product range. For example, with everybody aiming for Net Zero in 2050, I want to have a look at the renewable energy sector. It’s a huge investment sector and I think there’s scope for insurance growth around planning, permitting and the deal structure. In the longer-term, our goal would be to broaden our horizons into different geographies. I feel at my age, I’ve got enough energy and determination coupled with experience that I want to try and build a brand for the future.
Everyone who strikes out on a new path has ideas for how to do business differently. What are yours?
It’s to try and improve on things I noticed while working on the other side of the table. I used to get frustrated when brokers called me up trying to tell me about a building in Prague or Warsaw or Budapest that they’d probably never seen! Equally, they possibly wouldn’t know the people involved in the transaction, or for example the history of the buyer or the seller. They generally didn’t have a personal connection with the lawyers involved or the bank financing. They never tended to understand the jurisdiction, or how the chemistry and the relationships of the deals get done in CEE.
So, you were getting calls from people who don’t know much of anything?
Not quite. It wasn’t a lack of technical expertise, but more that there wasn’t any kind of personal or human touch. I think as managing director, what I want to try and shape with REassurance is for the team to have their own identities. I think the people we bring in will bring a certain personality to the company — an identity – and they’ll shape our culture. I think we forget that this is a people business. People like doing business with people they like. For lack of a better expression, relationships and understanding are key. I think there’s a place for us in the market to add value to the insurance broker process.
You say real estate insurance has changed. How so?
The more time insurers spend here, the more they respond to demand from clients. Take the booming logistics sector, where developers can take a huge greenfield site all the way to the finished article in 9-12 months. Something could come up that means they might need to modify the permit, but they haven’t time to stop or delay construction as it would be expensive or impractical. We can sometimes find a solution that can wrap around the permit risk or the planning risk that might have been breached. That’s an example of the insurance markets listening to clients to offer different products.
If you think about Warranty & Indemnity insurance, it’s crossed over from the traditional M&A markets to Real Estate. It’s essentially become a financial tool to the transaction process. Let’s say you’re closing down a fund or disposing of assets out of a fund. Representations and warranties usually last 36 to 48 months. In order to sustain them, you’d have to hold contingent liabilities on your balance sheet for that period of time. That means keeping the SPV or the fund open over that time and doing annual reports. W&I transfers that liability from the balance sheet to the insurer.
Taking out a policy for this can be confused with risk in the traditional sense. But it doesn’t mean it’s become a riskier transaction — we’re just transferring liability. It becomes a financial decision. In actual fact it demonstrates that the market is become more sophisticated because it now knows how to use insurance products to its own advantage. If anything, the fact that more insurers are entering this market shows that it’s becoming more mature and more sophisticated.
Are deals not happening at the moment because prices haven’t fallen enough? Or is it less specific?
It’s very difficult to pinpoint one single reason. Unfortunately, it’s almost a perfect storm of negativity for us in CEE. It’s not just Ukraine, it’s not just the cost of energy, it’s not just interest rates, and it’s not just inflation. It’s all of those factors coming together with low unemployment, the high cost of materials, and the cost of construction. To my mind, deals have been negotiated, LOIs are in place, heads of terms are agreed and funds have been raised. That’s happening as we speak and we will see deals complete before year end. But we’ve also seen one or two go on hold for various reasons that perhaps wouldn’t have blocked them in normal economic times. Particularly where there are retail funds involved as there’s been a rush of redemptions and they’ve got to have a certain liquidity. When banks are offering savings rates on cash deposits of five, six, seven percent it’s hard for retail funds to attract investors.
You’re likely see deals announced in Q1 that have been in process for some time, but I don’t see much in terms of new transactions really starting at the moment. I think the market is very, very flat and there is definitely an air of ‘wait and see’ amongst investors. I think it will probably at least MIPIM and possibly even EXPO Real next year before there’s any hint of people really starting to sniff around for new opportunities.
Arguably, not the best time to join a new venture?
I’ve been through this back in 2008/09. For me, it’s an opportunity to come in as managing director to try and create and develop something. I think it’s an ideal time to put best practices in place if you’re not tied to legacy issues. This is a time when you rely on relationships. This is when people become important, and you value the trust and longevity of your relationships. You can find confidence in working with people that you know can deliver, where trust and experience is paramount. I think this becomes more prevalent and is another element of added value.
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