Castle Insurance boss Bradley Heath says he is eyeing significant expansion over the next five years as a new capacity deal with Canopius creates fresh opportunities.

As insuranceNEWS.com.au has reported, national underwriting agency Castle will switch from QBE to Canopius capacity on December 1. The business launched a year ago offering home, contents and landlord cover to the intermediated market.

Mr Heath – who is MD of parent company Sure Insurance, which covers regional Queensland – says the first 12 months have gone well.

“In terms of policy numbers, Castle is in the many tens of thousands. What we’ve achieved in one year with Castle is about what it took us five years to achieve with Sure, which is proportionately about right when you think about it.

“The important point here is we’re looking to continue that level of growth and support the broker network.”

Mr Heath says Castle is not trying to “take on the world”, but it can offer an important specialised service.

“We are not going to take on huge amounts of market share from the big operators, but there is a national market there that we’ve got the opportunity to grow into.

“[The deal with Canopius] doesn’t change our core strategy, it just gives us a greater opportunity and at a greater scale down the track.

“We’re eyeing the next five years, and what we can provide to this market, and the scale of what we can do.

“This is about being a specialist and delivering a quality product at a quality price.”

As Castle moves to Canopius capacity, it will update its product disclosure statements and underwriting guidelines.

“We always said we’d review the PDS based on broker feedback, because the brokers are going to tell us exactly what needs to be done,” Mr Heath said.

“So we took the opportunity with Canopius to upgrade the product, and also upgrade some of our acceptance criteria. We’ll be telling brokers about that in due course.”

Other insurers have flagged profitability challenges in the intermediated home space, but Mr Heath says Castle is “satisfied” with current portfolio performance.

“The challenges are not new. They’re quite old in this class, in a country like Australia, where we do have quite a cross-section of events – whether it be bushfire, cyclone, flood, storm, hail.

“This is a country that’s got some extremes, and so that’s why I think a specialist can address that from an underwriting viewpoint, and from a claims management viewpoint.

“I think that’s what our role is: to face those known challenges head on.”

Commission rates will remain unchanged for now, but Mr Heath says the issue will continue to evolve.

“We announced recently that we took the commission to 12.5% on Castle. That’s where we are at the moment, but I think the entire market will just continue to review that. Some underwriters have gone to 10%, and some are still above us too.

“So I think there are probably more changes, at an industry level, over the next 24 months.”

Castle this year introduced a zero-commission option for brokers that prefer to charge a fee.

“Some brokers want it, others don’t want it, and others [want] to have the option of it. There’s quite a spread of thinking on it, and I think brokers in general, with this whole subject across all classes, will think further about it as time goes on.

“There’s an evolution going on, I would imagine, in most brokers’ minds, and that’s a matter for them and their clients.”

The Castle products launched on Ebix’s Sunrise Exchange, but Mr Heath says he plans to get onto other platforms.

“We’re still working on Steadfast Client Trading Platform, some of the technical aspects of that. If our broker panel needs us to be on there, or any other platform, and it’s a viable thing for us, of course we’re going to do that.”

Steadfast owns a majority stake in the business, and Mr Heath says the group’s pending private equity buyout does not affect the running of Castle or Sure.

“It is still very much business as usual, and we’re getting on. There’s no interruption to that.”