The following interview is a conversation we had with Jeff Radke, CEO of Accelerant, on our podcast Category Visionaries. You can view the full episode here: Over $500 Million Raised to Empower Underwriters to Deliver Better Insurance.
Jeffrey Radke
Thanks for having me, Brett.
Brett
Yeah. So before begin talking about what you’re building there, could we just start with a quick summary of who you are and a bit more about your background?
Jeffrey Radke
Sure. I’m afraid I’m a bit of a one trick pony. I think it’s 34 or 35 years in the insurance and reinsurance industry. So I started as a reinsurance broker, worked in the reinsurance industry, then the insurance side, and then we started Accelerant about four and a half years ago now.
Brett
And how did you make your way into insurance initially? Is that something when you were four years old, you didn’t want to be an astronaut, you wanted to work insurance or where did that come from?
Jeffrey Radke
This is one of those choices. Do you tell the truth or not? My father was in the reinsurance business, and I had a choice write a resume or don’t write a resume. And I chose the don’t write a resume and start interning for Guy Carpenter. I’m ashamed to admit that’s how it happened. Hey, I love the honesty.
Brett
You could have told me some crazy story there about how when you were.
Jeffrey Radke
No, it was a 16 year old decision that turned out okay despite the faulty underpinnings.
Brett
How would you say the industry has changed the most then, over these past three decades?
Jeffrey Radke
Wow. Technology has revolutionized everything. And in our industry, the technology isn’t that important, which I know sounds crazy. What’s important is the data. So technology that enables you to find and use data to satisfy the customer is the biggest change. And then there have been I think this is less important, but still important. There have been some structural changes where just the size of the companies, what I’ll call the old monolithic mainframe insurance and reinsurance companies, they’ve gotten so big that the risk sharing across the industry that was sort of the norm when I started in the business, really sort of end. Each of these companies is now large enough that the legacy companies tend to write their portfolio of business and retain it, which has caused quite a fair amount of difficulty for the professional reinsurance, I think. So those would be the two biggest changes over time.
Jeffrey Radke
My hairline. I suppose.
Brett
We’Ll have to do your.
Jeffrey Radke
Headshot here so people can say, you can imagine. That’s so funny.
Brett
All right, now, two questions we like to ask just to better understand what makes you tick as a leader. So first one is what CEO do you admire the most, and what do you admire about them?
Jeffrey Radke
I sort of thought in terms of the founders that I admire most, three people come to mind, and maybe I’m taking the license to change your question a little, but Michael Buck just recently passed away. I think it was last week. And boy, did he reinvent how people thought about reinsurance and really kick started Bermuda as a new reinsurance hub. And I find it so fascinating when men and women can enter such an old industry, just look and see that something’s missing or something’s broken or there’s a customer base that needs to be served. And Michael B*** and many other people certainly did that, but he was I think it’s fair to say he was a giant among the industry. The other two, sadly, are also not with us anymore. Steven Glucksturn and Michael Palm. I was lucky enough to work pretty closely with them in the beginning as they created a company called Centeree, which probably isn’t exactly true, but definitely pioneered a whole new way of doing reinsurance and sharing risk.
Jeffrey Radke
And it was a paradigm shift as opposed to a fundamental technology shift. And you know what? Those paradigm shifts, as I get older, I think are harder because you’re trying to change people’s minds and keep them changed, and that’s not real easy. So those are three names that I pretty consistently think about what they’ve achieved and feel inadequate.
Brett
Well, I can’t say I’ve heard of those three, but also, I’m not from the insurance space, so makes sense. And it’s refreshing whenever a guest comes on and talks about someone other than Elon Musk or Jeff Bezos or any of these guys that are just kind of like the no brainer, obvious founders to follow. It’s always fun to hear about the ones from specific niches and industries.
Jeffrey Radke
Yeah. And probably somewhat, I don’t know, I won’t say self serving, but a little bit the mark those guys made was akin to the mark we’re trying to make at Accelerate, where I’m not sure we’re fundamentally changing the raw material of risk. What we’re doing is changing the paradigm about how people think, about how that risk should be handled and really exchanged, how we get that risk, that specialty insurance risk to the capital providers. So there’s a thread there, Brett, I think, or at least in my mind, there’s a threat. There’s a logical thread through all three of those names and accelerator.
Brett
Yeah, that makes a lot of sense. And one other question, a bit off topic from our interview that we had mapped out, but I wanted to ask you, what’s the deal with Bermuda and reinsurance? I feel like those are always two very closely associated names or terms like, what’s the deal there? How did that come to be?
Jeffrey Radke
Yeah. In 1986, caused largely because of a liability crisis, a liability loss crisis in the United States. There was a real absence of capacity. Municipalities weren’t being able to find insurance, nor were doctors, nor were many businesses. And Marcia McLennan, to a large degree, Aon, two banded together with a bunch of investors and started forming these companies offshore. And one of the reasons they formed them offshore was, well, twofold A, I think the regulatory environment was more conducive. And then the other thing, of course, is if you’re writing relatively out of the money exposures, so infrequent losses, the tax impact on your build up of surplus is pretty pronounced. So Bermuda, then and now, has a near zero corporate tax rate. And what that meant is those companies could build up the capacity to try and alleviate the absence of capacity much more quickly. So anyway, that’s how it started.
Jeffrey Radke
Like humans tend to do, right? Once a thing gets started, it tends to be perpetuated.
Brett
And you said that was 1987, right? Was that right? When you were entering the industry? So were you entering then at that period of crisis?
Jeffrey Radke
I was an intern at Guy Carpenter, so it’s probably not fair to say I was entering. But what I’ll tell you is I was standing back watching the train wreck, that’s for sure.
Brett
Wow. Crazy time to be part of it, then.
Jeffrey Radke
Yeah, it was. And it was a good time.
Brett
That’s awesome. Now, another question we like to ask. Is there a specific book that’s had a major impact on you as a CEO? And this can be a business book or it can just be a personal book that’s really influenced how you view the world?
Jeffrey Radke
Yeah, there definitely is. There’s a book called Leadership and Self Deception, and it’s written by the Arbinger Institute. And boy, has that had an impact on the way I try and think about things. It’s one of those books that I read periodically because at least I forget some of the lessons. You try not to, but you forget some of the lessons. And the short version of it is we all kind of know what we ought to do, whether it’s in our personal lives or our business lives, and we often don’t do what we ought to do. And humans are particularly bad at being honest with themselves that they’re not doing what they should. So instead, they invent this enormous nonsense in your own head about why you actually are on the moral high ground. And because it’s poppy c***, usually it drives you to do all sorts of crazy things, whereas if you are honest with yourself, you’re perceived by others as being honest.
Jeffrey Radke
It feels that I’m convinced that humans are incredibly good at something out, whether, Brett, you’re approaching me with a true open heart or not in a given situation. So I don’t want to dwell on it, but I would recommend it to anyone who wants to think about how they could be more effective.
Brett
I think you’re probably the third or fourth person to recommend that book, so that’s the tipping point for me. I’ll have to check it out. I’m also glad to know that I’m not alone in going back and rereading books for five years ago. Six years ago, I used to just try to read as many books as possible. Now I’ve just kind of given up on new books for the most part, unless it’s highly recommended. Now I just go back and reread the books over and over again that have had a huge impact on me.
Jeffrey Radke
Well, there you go. And remember, Brent, that Thomas Jefferson, trying to balance the budget, decided or argued that we should get rid of the patent office because everything that could be invented, obviously had been already. So there was no need for the patent office any longer. Sort of like no need for new books. Yeah, I love that.
Brett
All right, now let’s go to day zero. Or we can call it day one of Accelerant. What is the origin story behind the company?
Jeffrey Radke
Well, well, before day zero, it starts in a bar, right? They always start in a bar. I was with my partner and colleague chris Lee Smith in Stockholm, and were talking about how hard it was to satisfy our customers and our customers, broadly speaking, specialty underwriters MGAs, how hard it was to serve our customers inside a traditional insurance company. There are just all sorts of social issues that make it really difficult, and then on top of it, these old technology stacks that won’t allow data to flow. We were frankly getting discouraged at the beginning of the evening. Towards the end of the evening, you always get a little more bullish and ambitious about your capabilities. And we convinced ourselves at the end that there must be a better way that we could actually implement. And we started talking to a relatively small group, 1015, 820 people that we had worked with that we really respected.
Jeffrey Radke
And I say jokingly, but it’s not much of a joke that within six or eight months, we had assembled a group of angry men and women that were really old and experienced. And were just convinced were all industry veterans, and were all convinced there was a better way to do it. And the better way to do it was focusing on service to those MGAs and an absolute focus on a two legged stool. I know I’m supposed to have three, but a two legged stool, which is a team of experts satisfying your customers needs, and on the other side, the best data that you can possibly get delivered at a time, a place, and a fashion where those experts could really use it. So that’s the origin story. And we started on the 1 December 2018, we ended that year supporting 14 MGAs. We’re now the MGAs we support, we call members to remind ourselves of the duty that we have towards them.
Jeffrey Radke
I think we’re up to 106 today. So, yeah, we’ve been incredibly fortunate to attract what we think. It’s just a great bunch of members, and they make the business accelerants the sum total of their skills and relationships, so we never lose sight of the fact that we’re here to serve them, and their success is our success and vice versa.
Brett
And just to understand the market penetration there, how many MGAs are there in the United States? Or I guess not in the United States? In Bermuda, it sounds like how many of them or what’s the market look like?
Jeffrey Radke
You were right the first time. The MGAs tend to be very local. So subject to regulatory approval, we plan to enter Canada this year. We’re in the United States. We’re in the United Kingdom and we’re in the EU supporting MGAs. How many are there? Well, that’s almost impossible to answer. I guess what I would say, Brett, is the small to medium sized commercial market, whether it’s Mga or otherwise, is enormous for the classes of business, we write over $200 billion. So if you get a sense about the market penetration, really big market, highly fractured. So with Accelerant writing last year, roughly a little bit over a billion dollars, the market share is still pretty small.
Brett
Wow. Sounds like there’s still been a lot of traction, though. What do you attribute to that success?
Jeffrey Radke
You see it in tons of industries. I attribute that success to a recognition that the highly motivated, individual sort of owner, operator, small business linked together with top notch information pipelines, will outperform the monolithic big corporate. They’re faster, they’re more motivated, they’re more efficient. And our business model is to support those small individuals as opposed to the big, monolithic legacy companies. And as it’s the case in so many other industries, they’re winning. And they’re winning because the big advantage of scale has almost disappeared. Right there’s dis economies of scale in the insurance industry to a large degree, because if you’re big, the only way you got big is by being around for a while. The only way that you could be around for a while is to have layers of old legacy policy administration systems, which means I’m sure someone smarter than me is going to be able to figure it out.
Jeffrey Radke
But when I worked inside an insurance company running operations, I came to the conclusion that it was effectively impossible to modernize it.
Brett
And are you perceived then, in the market as the disruptor? And are there legacy companies that view you in a potentially almost hostile way?
Jeffrey Radke
Probably pretty presumptuous to think that those big companies think about accelerate at all. I don’t know. I’ll leave it to them. Every once in a while, you get excited, and yet you have to remember that we’re running an organization that is in an industry where their company is ten times, 2100 times bigger than us. So I don’t know if they’re focused on us. We tend to be focused on business that they hate. The small to medium sized commercial business is just a real bear for those legacy companies to handle because the premiums are so low, because the efficiency is so important. The fact that they have those challenges I just talked about with technology really bites. There really pinches. So anyway, I don’t think someone running Chalber travelers is sort of tossing and turning, saying, what about those Accelerant guys? So are we a disruptor?
Jeffrey Radke
We’re pursuing a paradigm shift. And if we’re successful, if we continue to be successful, growing at 100 ish percent a year, it’s going to make a difference. I wouldn’t be so presumptuous as to predict to make such a big difference as the folks that I talked about earlier, the Michael Butts and the Steven Glucksters. But paradigm shifts are pretty powerful when they start to happen, and the adoption has been pretty strong. Right business model, right place, right time is how I describe it breath.
Brett
And as you pursue that paradigm shift, what do you think is going to be critical to your success there in making that happen and making that a reality?
Jeffrey Radke
So we’re lucky enough to enjoy a net promoter score from our members, the MGAs that we support of 87. If you know much about the MPs score, that’s a number that just fills me with dread because it feels like the only way to move is down. Right? That’s an extraordinary MPs score compared to the insurance industry, which depends. What you look at is either 32 or eleven. It’s really bad and 87 is great. So let’s say that we keep that service up because it’s such a key tenant of Accelerant. That means the supply of those insurance risks is going to keep coming. If we continue to provide superior service to those specialty underwriters, that flow will keep increasing like the flywheel that’s starting to turn right. So now we should think about the risk capital, the other side of our platform. And the risk capital, I think, will keep coming, provided that we can find ways to deliver the portfolio of business where we’re sourcing it, managing it and monitoring it using our team of experts.
Jeffrey Radke
And that really high definition data. We need the paradigm shift of risk capital providers to be like, it’s okay to mutualize that I don’t need to do that myself. Because if they feel like they need to do that themselves, then of course we’re duplicative. If, conversely, a risk capital provider says, I trust the track record that Accelerant has demonstrated, I’m going to let them do this once at scale with superior technology, then we’re all of a sudden half more efficient than the industry, on average.
Brett
Pretty powerful.
Jeffrey Radke
So long winded way of saying the parent on shift that really needs to occur is on the risk capital side where people have to be willing to not do everything themselves, but rather watch the portfolio be managed using that accelerate team of experts and the Accelerant data and analytics.
Brett
Got it makes a lot of sense. And another question is just in terms of funding, are these types of funding rounds normal in the insurance space? We do a lot of work in cybersecurity, developer tooling, things like that. And it’s not common to see like, I think I read online that there was a $190,000,000 round at a post, $2 billion or pre money $2 billion valuation, something along those lines. Is that normal or is that a very unique situation to have these types of large funding rounds relatively early on?
Jeffrey Radke
I guess we’re a little bit of a hybrid, Brett. So we do have insurance company balance sheets. That’s part of how we serve both sides of our risk exchange platform. So we serve members by being able to issue policies from insurance companies that we own as well as those that we don’t. On the risk capital side, again, in order to allow certain types of investors to participate, like institutional investors that have no license, they need us to have a statutory license that requires capital. And so then those numbers tend to be bigger than what you’re used to in a pure technology type driven business. And of course, that’s the other piece. The risk exchange is one of those low capital, technology driven businesses. So we wouldn’t be raising those exciting numbers if it weren’t for the balance sheets that we require to provide that service.
Jeffrey Radke
And I’d have to say, Brett, we knew that were going to need to prime the pump and have our own insurance company balance sheets so that we could demonstrate to the industry how this would work. And what we’re seeing now. And when I say now, I mean the tail end of last year and this month and last month. What we’re seeing is we’re seeing pretty strong adoption from the insurance companies about participating on our risk exchange, which is really exciting. It’s a really important step in the evolution of our risk exchange.
Brett
And speaking of exciting, let’s talk about what excites you. So what excites you most about the work you get to do every day? What motivates you to get up and grind and build this business?
Jeffrey Radke
Yeah, Accelerant is really other focused and I find that just incredibly different and almost required. And what I mean by other focused is I and my colleagues spend, I don’t, 85, 90% of our time trying to figure out how to make our members be more profitable faster. And the other 10%, we’re figuring out how to make the risk capital portfolios grow either with less volatility or more size. And what I find is, especially in businesses where you got a group of people. I’ll bet you we’ve got 260, maybe 270 people working on the Accelerant team. Now. When you get a glimp of that size and your mission and your values are other focused as opposed to trying to squeeze the last shekel out of the dollar for yourself, you get much better outcomes and you get a much better attitude. And to a large degree I think that’s our culture and both our culture and how personally many of us feel about things.
Jeffrey Radke
So that’s what motivates me. It probably wouldn’t be right for me to tell you whose business I was working so hard to improve today, but that’s almost the case. Every day it’s sort of okay, this member or that member or this risk capital provider, we’re going to focus on trying to move them down the line to achieve their objectives. That’s what does it for me and the absence of nonsense. Right. I may work a lot of hours but I spent less time on nonsense work. And of course, you know what, word really goes in for nonsense but I spend less time on nonsense work that I bet most of my insurance industry colleagues love it.
Brett
All right, last question for you. Since I know we’re up on time, if we zoom out three years from now, what’s the vision for Accelerant?
Jeffrey Radke
That risk exchange is spinning really hard. From a flywheel perspective, we’ve continued to grow because our service on the supply side to the MGAs and the specialty underwriters is so good and the data and the analytics is so good that we’re drawing in more and more underwriters. And with that additional data and additional business, we’re becoming more and more efficient and sucking in more and more risk capital providers. And that platform is singing even more so than it is today. Our balance sheets matter much less that we are just talking about and rather we’re more, again, other focused on getting that business and those cash flows associated with the insurance business to the risk capital investors that really want it. I can’t wait. It’s exciting. This part is going to be a really good part because it feels like that paradigm shift, we’ve turned the corner and boy, you’re going to pick up speed from here.
Jeffrey Radke
Or I think Accelerants Risk Exchange is really going to pick up speed from here.
Brett
Nice.
Jeffrey Radke
I love it.
Brett
All right, Jeff, unfortunately that’s all we’re going to have time to cover before we wrap. If people want to follow along with your journey as you continue to build, where’s the best place for them to go?
Jeffrey Radke
I think the website is certainly easiest. You can find any of us, all of us there and the website is Accelins.com.
Brett
Awesome. Jeff, thanks so much for taking the time to share your story, your building. Really appreciate it.
Jeffrey Radke
No, thank you. Really enjoy it. Have a great day.
Brett
Keep in touch.
Twitter
facebook
linkedin