Bowhead Specialty seeking additional capital to support growth beyond $500mn

Bowhead Specialty is exploring options to add capital to its insurance company subsidiary to support a strong growth trajectory expected to take gross written premium close to $500mn this year, as it also engages with American Family to extend its capacity relationship beyond the end of 2026, Program Manager can reveal.

The Stephen Sills-led company was launched in late 2020 with financial backing from Gallatin Point, American Family and management.

It has AM Best A, XV-rated capacity from Wisconsin-based mutual American Family, having first launched writing D&O business before expanding into the casualty and healthcare segments.

Although technically it acts as an MGA for American Family, Bowhead Specialty describes itself as a full-stack insurance company with an A, XV-rated companion partner because 100 percent of the premium is ceded to Bowhead Insurance Company.

Bowhead Insurance Company is then understood to retain 75 percent of the first $5mn of loss.

Bowhead Specialty and Bowhead Insurance Company are both subsidiaries of Bowhead Insurance Holdings, which is majority owned by Gallatin Point (68 percent), with American Family (29 percent) and management owning the rest.

The partnership with American Family is understood to be on excellent terms. It includes long-term access to capacity – as well as an option for the US insurer to buy Bowhead Specialty, although that is not seen as a likely near-term outcome.

The option comes up in March 2024. Sources said there is currently no expectation that the option will be called by American Family, but talks are understood to be taking place to extend the underwriting agreement beyond the end of 2026.

At the same time, Bowhead Specialty and its private equity backer Gallatin Point are expected to look to engage with potential sources of additional capital to support the firm’s continued growth trajectory.

Sources said that a number of options are likely to be considered, from adding a financial sponsor, to a form of rights issue.

In July, sister publication E&S Insurer reported that Bowhead Specialty was seeing significant growth opportunities despite the wave of entrants into the E&S space and was looking to diversify its $200mn casualty book following the addition of Derek Broaddus from Allied World.

Bowhead Specialty – with its American Family support – has the ability to put down $15mn in capacity on a risk, but the average limits it deploys tend to fall between $5mn and $10mn.

In an interview with E&S Insurer, Sills said that Bowhead Specialty ended 2022 writing around $350mn of business, with the largest of its three verticals being casualty, headed by former Navigators executive Jeff Saunders.

“I think this year we’ll probably do approximately $475mn and we haven’t really scratched the surface in terms of what a Chubb, Axa XL, or Everest is doing, so there’s still plenty of room to grow. We don’t see any walls or barriers ahead of us,” he commented.

And the executive revealed that following the May addition of Brendan Falvey from Applied Specialty Underwriters as head of public entity, and Broaddus a month later, the company remains on the lookout for star individuals or teams that have track records of underwriting and strong broker relationships.

“We want people that know how to balance having good relationships and giving good service while maintaining underwriting profitability,” Sills explained.