The Intelligent Quarterly from the publishers of The Insurance Insider

Spring 2012

Search archive

Advanced search

At last year's reinsurance Rendez-Vous in Monte Carlo a benign hurricane season, recovered balance sheets and the absence of major industry events allowed tongues to be freed up for idle chatter around the coffee tables of the Place du Casino.

And featuring heavily among the topics of conversation was the rebirth of an industry icon.

With a high-profile assault on the US wholesale broking sector under way, Pat Ryan had already made his presence felt on his return to the market.

But while rumours had been circulating about the Aon founder's plans to grow his new Ryan Specialty Group (RSG) venture across the Atlantic, little was known about his international strategy and its ultimate end-game.

Occasional sightings of former Beazley executive Johnny Rowell - designated as Ryan's right hand man in London - had started chatter about a potential Lloyd's start-up, while the recruitment of a trio of HCC Europe alumni pointed towards a Continental foray.

A year on, the picture is beginning to become clearer.

Although RSG has matured at a faster rate in the US, solid roots have now been put down in London with a deal to buy Jubilee for around £35mn agreed earlier this year.

Ending a protracted pursuit for a way into Lloyd's, the deal also positioned RSG as the first broker to own a Lime Street syndicate in more than 30 years.

Under the radar, the start-up has been active in the managing general agency (MGA) space in London as it looks to build out its distribution platform in EC3 and Europe.

So it was that IQ headed out to the humid heat of Chicago in early August to track down Ryan and establish just how the firm's international presence is being pieced together.

A new incarnation
Sat on the 20th floor of the Aon Center looking out over the city's Millennium Park it is hard to disentangle the path of RSG from that of the company Ryan built to become the world's largest (re)insurance broker.

We are in the offices of Aon, a firm in which Ryan continues to own a significant investment and with which RSG and AmWINS have just been named as exclusive US wholesale partners.

It might be tempting to think that RSG will simply become the wholesale arm that Aon has lacked since the post-Spitzer sale of Swett & Crawford; or that with an international blueprint Ryan is looking to mould his new project in the image of the platform he spent 44 years building.

However, Ryan is adamant that his new incarnation will be very different.

It is his firm belief that the big three - Aon, Marsh and Willis - will not go back into the wholesale business in the US. "There was a new model created in 2005. In my opinion those days are past," he says.

"I look at the MGA strategy as one of fulfilling a need in a specialty line, then having the ability to get access to the distribution"

Nor, despite his pride in playing a major role in the building of Aon Re (now Aon Benfield), is Ryan interested in re-entering the reinsurance arena as a broker, in treaty or fac.

"I love the reinsurance business, but I want to work with reinsurance brokers and not compete with them."

That theme of not wanting to compete with clients extends to London, where RSG will not be embarking on a wholesale broking model that would see it rub up against the Lloyd's broking arms of the big three.

Instead, his strategy stands on four main pillars - or legs of a stool as he likes to put it: wholesale broking (where not in competition with clients); MGA start-ups and acquisitions; risk-carrying via Lloyd's and providing "other services" to agents and brokers.

Ryan admits that the biggest growth opportunities currently exist in the US, where buyers are driving the wholesale market as much as sellers are in the MGA arena.
So what of the international opportunities?

In wholesale broking, RSG will look to Latin America as well as certain European countries where it does not compete with its retail clients from other geographies.

But it is the firm's plans for Lloyd's and the potential to grow its MGA platform from there to Continental Europe that gets Ryan fired up with enthusiasm.

"That opportunity is outstanding, hence our Jubilee strategy," he proclaims.

"The UK happens to be the regulatory domicile, but while some wait for the business to come to them, others go out and get it by moving their company into other jurisdictions. That's what we'll do."

For RSG, Lloyd's long history with coverholders provides the perfect opportunity to operate both as a risk taker and as a facilitator by bringing risks to be written by its peers into the market through MGAs.

"The percentage of underwriters in Lloyd's that know, appreciate and respect the MGA as a way of doing business is much higher than in the US, Europe or Latin America. We don't need to change that in the US, but we hope to do so in Europe and Latin America," Ryan explains.

According to Ryan, taking risk on a Lloyd's platform via its own MGAs is not in conflict with RSG's aims to avoid competition with clients.

"It looks like it's a conflict, but we really believe that Lloyd's is a unique franchise in that you get 200 cross-jurisdictions of authority, of which the US is just one. It's a unique opportunity to be creative - not in a competitive way but in a complementary way to carriers and on behalf of retail brokers," he says.

The industry veteran points to the scenario where a niche opens up for an MGA in a line of business or geography in which there isn't a local carrier prepared to fill the need as a risk carrier.

"We can do that, say take 10 percent, and then syndicate it back into London so that many of our trading partners become involved and it becomes accretive. That creates a multiplier effect back into London.

"It could come from Asia, the US, Latin America or Europe - it's about facilitating opportunity rather than being competitive. I've explained that to several of our good friends - important London leaders, and they like that," reveals Ryan.

There are limitations imposed by Lloyd's on RSG's dealings with Jubilee that mean only 20 percent of its book can come from related parties.

Ryan explains that there is an agreement in place with Lloyd's franchise performance directorate that the firm will "be very cautious" in growing Jubilee beyond its 2011 capacity of £127mn.

"We will not look for much growth at all in 2012 and prove to them that the house is in order in relation to regulatory, financial and operational before we look to expand," he says.

Prologue to Euro growth
Expansion in Europe through MGAs is under no such constraints, however.

Although he acknowledges that there hasn't been a great history of MGA relationships between Lloyd's and Europe, Ryan believes "the past is not necessarily a prologue".

And in his eyes, the recent relocation of carriers - particularly from Bermuda - to Dublin and Zurich need not present a barrier to an MGA strategy.

"I look at the MGA strategy as one of fulfilling a need in a specialty line and then having the ability to get access to the distribution.

"As carriers are looking to expand, should they set up an infrastructure or have an MGA relationship that gives a variable cost as opposed to infrastructure costs? I believe the latter," Ryan suggests.

Rather than targeting expansion geographically by setting up offices in key European territories, the focus of RSG's MGA strategy will be dictated solely by niche opportunity in specialty markets.

"Fundamentally it comes down to whether there's a need for a specialty approach and talent, and whether we can differentiate ourselves with that talent and reach into the distribution system to get the quality of exposure we need.

"I think the answer to all of those is yes, but on a very 'rifle shot' basis," the firm's founder explains.

In the company of Ryan it is impossible not to admire his hunger for the industry and his focus to prove that he can create and build a high quality business again.
And it is in Lloyd's that Ryan, the ageless entrepreneur, identifies kindred spirits.

"One of the great things about the insurance business is that it's so fragmented and that creates many opportunities. In an environment such as Lloyd's where so many syndicates are founded by entrepreneurs, entrepreneurs can become important," he concludes.