Comment: An industry of adrenalin junkies

Comment: An industry of adrenalin junkies

To an outsider, insurance does not immediately look like an industry for adrenalin junkies. It might seem odd to rank underwriters next to racing drivers, or broking alongside coaching a champion sports team. However, a little insight reveals it is likely the risk-based nature of the business that provides the unseen hook, akin perhaps to compulsive gamblers or obsessive stock market traders. In any case, it seems that many of the top players in the insurance game just can’t stay away from the table. 


The most recent embodiment of this temptation is Grahame “Chily” Chilton, Aon-Benfield co-founder, who headed Benfield and later served as the reinsurance broker’s chairman after its Aon merger. Chily is back in the driving seat with the launch of punningly-named Capsicum Re, a new London market broking venture with Arthur J Gallagher. (Chily can claim that high-octane thrill seeking runs in his family: his sons Tom and Max are both successful racing drivers.)


The Capsicum Re announcement came soon after news that Brian Duperreault, another industry stalwart, former Marsh & McLennan Companies CEO, and an ex-chairman of Ace, was returning to the fray. Duperreault is at the head of a group of institutional investors taking over Sac Re, to be renamed Hamilton Re, with Duperreault leading as CEO. 


Duperreault has a challenge on his hands. He will need to turn around the Bermudian firm. Sac Re’s sale had been expected despite it only beginning operations as recently as 2012, since several employees at the firm had become caught up in insider trading charges (placing constraints on managing external investors’ money). 


Other recent examples of the industry’s big beasts needing a new challenge abound. John Charman, once nicknamed “King of the London market” – or less kindly as the Godfather by those who feared him for his record for ruthlessness – carved out a formidable reputation at Lloyd’s, and founded Bermudian reinsurer Axis Capital, before more recently re-emerging in May 2013 as Endurance’s new chairman and CEO.

 

Pat Ryan, Aon’s “retired” founder and former chairman and CEO, has proven equally unable to resist a return to the insurance industry. After leaving Aon in 2008, the seventy six-year-old entrepreneur initially led an unsuccessful bid to bring the Olympic Games to Chicago, before returning to insurance to found fresh venture Ryan Specialty Group in 2010.


Among this class of insurance addicts, Hank Greenberg, the former AIG boss, is probably the most prominent example. Once the doyen of the industry, he led AIG to become the world’s biggest insurer. Hounded out after a brush with (since disgraced) former New York attorney general and governor Eliot Spitzer, he did not stay away for long.


While AIG was humbled by the credit crisis, octogenarian World War II veteran Greenberg assumed the helm at CV Starr – the firm which originally spawned AIG – becoming its chairman and CEO. Furthermore, it seems to be insurance that runs in the blood of the Greenberg dynasty: sons Evan and Jeffrey both grew up to occupy CEO seats, at Ace and Marsh & McLennan Companies respectively.


What does all this mean? Firstly, if the allure of the risk transfer industry can be effectively communicated, it bodes well for recruiting the go-getting graduate hires of tomorrow. Robert Hiscox, another retired insurance legend of the London market once made light of this, joking with an interviewing hack that his risk appetite had only increased with age: “I quite like a bit of risk. Dying on the horn of a buffalo would be quite a way to go, don't you think?”


For an industry with risk in its blood, insurance emerged from the global financial crisis as an industry relatively untarnished, compared to the sins of bankers. The malaise affecting the banking sector since the crisis has also helped to lessen the pay gap between bankers and workers in the insurance sector, once viewed as an undesirable, poorer cousin.


Conversely, the titans of the insurance sector listed above all have several attributes in common. While they are arguably in their professional prime, they are all ageing white males, and the product of generations before globalisation. The industry’s composition must change. Inga Beale’s appointment as the first female Lloyd’s CEO in the market’s 325-year history is to be celebrated, but it needs to be part of a broader, industry-wide trend.


John Nelson, the Lloyd’s chairman, suggested as much with the Vision 2025 strategy. Scor’s CEO, Denis Kessler, has also spoken about the need for long-term strategies when entering new markets, including planning for local recruitment. The fashion for diversification in the risks the re/insurance industry takes ought to be transferrable to greater equality and diversity within its hiring policies.


Recruiting the best talent in future will be easier the wider the net is cast.  Any post-crisis advantages won against other facets of financial services are temporary and fading fast. Stiff competition felt in pricing within the re/insurance industry, and the sector’s attractiveness to capital markets investors, both suggest that demand for talent will only grow. Furthermore, expansion into booming emerging markets in Asia Pacific and Latin America is opening the gates to yet more intense competition, greater demand for talent, but also a broader pool for recruitment.


This is a challenge for today as well as tomorrow. The shrewdest risk takers among today’s insurance leaders will already be thinking about this.


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