Pat Ryan, the founder of Aon and now-CEO of Ryan Specialty Group (RSG), believes the next Lloyd’s CEO should be someone with substantial experience of the market.
His comments follow the appointment of insurance headhunter Ian Lazarus and his firm Sainty, Hird & Partners to find a replacement for Inga Beale who resigned last month.
Speaking to re-Insurance.com in London this week, Ryan said installing a successful Lloyd’s practitioner with a “really good business and insurance mind” at the helm of the market would be helpful because they would understand first-hand the challenges facing the Corporation.
Ryan, a well-known face to the global insurance industry and a member of the Chicago business elite with a personal wealth estimated at over $2.5bn, was in London meeting markets, clients and broking partners for his fast-expanding group, which combines a wholesale distribution broking arm and a large managing general underwriting operation.
His comments also come at a time when Lloyd’s is exposed to a number of well-publicised challenges including a high cost base, competitors with access to cheaper sources of capital, the industry-wide pressure on rates and a number of under-performing syndicates.
Beale’s decision to step down – taken in consultation with chairman Bruce Carnegie-Brown following his arrival last year – immediately triggered debate about whether the role best suits someone from outside the industry or one with substantial insurance knowledge.
Lazarus’ background in insurance - he is himself a former broker and has placed a number of senior market executives including Tom Bolt into Lloyd’s as the then franchise performance director - has lent weight to the suggestion that Lloyd’s would also prefer someone with substantial insurance experience.
Beale was a former underwriter but her predecessors Richard Ward and Nick Prettejohn came from outside of the industry - albeit that management consultant Prettejohn was formerly at the Corporation in a senior strategy role.
Another potential requirement may be to improve Lloyd’s relationship with some of its brokers – especially the larger, multinational firms like Aon, Marsh and Willis – where tensions have developed over frustrations on process issues, an FCA investigation into market practices in the wholesale market and underwriters’ concerns over some broker commission arrangements and facilities.
But Ryan does not believe it should naturally follow that Beale’s replacement should be a former broker.
The candidate selected should just be a “really strong, experienced member of the Lloyd’s family whether it’s an underwriter or a broker,” Ryan told re-Insurance.com.
Ryan was a personal friend of Sir David Rowland, the former insurance broker who became Lloyd’s chairman between 1993 and 1997 and won plaudits for steering the market through the litigation difficulties of the early nineties that culminated in reconstruction and renewal in 1996.
“He was a great leader”, remembered Ryan.
Despite the more recent tensions, Ryan was keen to stress the mutual interest between between Lloyd’s and its brokers.
“Large brokers need Lloyd’s and Lloyd’s needs them,” he said.
With over 60 years experience watching the insurance pendulum swing, he was also keen to identify some of these difficulties as cyclical issues.
“When we get into the softer market that we’re in, it’s a natural phenomenon that acquisition costs go up.”
“When we had hard markets, the commission cost gets lowered and it was ‘take it or leave it’,” Ryan said.
In a soft market, he said carriers argued down commissions “because they could”, meanwhile in a hard market, brokers raised their commissions “because they could”.
I have always said: “If you don’t like it, don’t do it.”
Ryan also confirmed that his group remained committed to its strategy of not owning a London market wholesaler but instead accessing markets through different brokers.
“It was a clear strategic decision not to own a London broker because we want our brokers to choose who they think is best for the client”.
“It enables us to service the client more effectively”, he added.