Marsh & McLennan Companies’ takeover of JLT and Aon’s pending purchase of Willis Towers Watson will push smaller brokers to build out their reinsurance operations, according to Steve McGill.
The executive, whose company McGill and Partners launched in May 2019, said that the future reinsurance market would reflect the concentration of power now that Guy Carpenter has taken over JLT Re and Aon is set to combine reinsurance operations with Willis Re.
In an interview during this publication’s (Re)Connect virtual event, McGill said the race to offer an alternative to the two behemoth reinsurance brokers includes his own firm as he highlighted its recruitment of 34 staff across treaty and fac business so far.
McGill said he was confident the firm can compete for large corporate business.
“One of the key parts of our value proposition in dealing with corporate clients, and particularly larger corporate clients, is bringing together our insurance and reinsurance capabilities in an open and transparent way,” said the executive.
“We’re already representing 135 large corporate clients. The wins that we have had in the last couple of months have been very significant.”
McGill said he had begun planning to form the Warburg Pincus-backed firm in 2017, when he saw “an opportunity to go deep and narrow around specialist broking expertise” before either of the current mergers were announced.
“Clients wanted a choice. Carriers were concerned about concentration risk and they have got phenomenal relationships with major high-quality broking firms but they want to see alternatives for distribution,” McGill said.
“Sitting here in 2020, everything I’ve seen in the changing landscape has massively validated the original thesis,” he added.
McGill’s growth strategy has been one focused on talent acquisition rather than buying other businesses. Notably, the business has avoided the types of legal battles sparked by recruitment elsewhere in the broking sector.
“We’re very pleased with the fact that we’ve hired 235 colleagues from across the industry, particularly in London, in 56 different firms, and we have not been subject to any litigation,” said McGill.
“Colleagues that come in to the firm… have contractual obligations to their existing employers, and the important thing is to respect those obligations. We have been really rigid in insisting that colleagues that join this firm respect their obligations.
“There are many things that colleagues can do when they join the firm beyond worrying about clients where they may not be able to work with those clients for a period of time; there are masses of opportunities.”
McGill added that he, chairman John Lloyd and head of specialty Karl Hennessy had been clear with new staff around conduct standards.
“Being respectful of your competition is also another element of McGill and Partners,” said McGill.
“We recognised that many of these firms we are going to have to work alongside as we build our business. We see the strengths and capabilities of those firms; we respect them. Clients respect that position. They don’t want to get embroiled in litigation.”
The executive highlighted the convergence of challenges facing the industry including increasing frequency of cat losses, social inflation and now Covid-19, as a “unique” situation.
“With Covid losses looking like they might be… plus or minus $100bn, you’ve got the biggest loss in the history of modern insurance on top of a pretty challenging environment for underwriters, and that creates a really challenging environment for clients,” said McGill.
“From McGill and Partners’ standpoint, it absolutely underlines why the firm has been formed, why we’re focused on deal-making and structuring the most effective deals for clients and why a boutique, specialty firm is really appropriate for this moment in time in the industry.”
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