Richardson: The modern broker must take the Moneyball approach
Existing structures that have been in place for 20-30 years will be dramatically disrupted and a new approach taken around data and analytics as insurers and reinsurers pivot or change their capital stacks and mix of distribution.
This is according to Elliot Richardson, vice chairman of Howden Tiger, speaking at The Insurer’s Pre-Monte Carlo Forum.
The modern (re)insurer needs to “adapt at never-before-seen speed” and the winners will be those that can “efficiently match risk to the most appropriate form of capital”.
But the executive directed his greatest call to action at his fellow intermediaries, stating “the middle person in a transaction must bring value”.
He continued: “The modern broker must stop peddling the same things that have been done for the last decade. You need to bring smart partners in from outside the industry to help. You do not need to build everything in-house.”
Howden Tiger is betting that its suite of services – which include capital market expansion and strategic data-led advisory – will allow it to remain relevant to clients in the future.
“In the new world of analytics and data, it’s time to rip up the old and take the ‘Moneyball’ approach.”
Moneyball is the celebrated Michael Lewis book that charts the improbable success of the Oakland Athletics baseball team following a data and analytics approach to player selection under the canny stewardship of manager Billy Beane. It was later turned into an acclaimed Hollywood film starring Brad Pitt.
Winners, in the reinsurance world, will be those who look at the trends and data and structure their business and offerings accordingly, Richardson explained.
“This will mean a changing market structure, with roles like chief transformation and chief data officer being at the top table.”
The war for talent
There are few better-qualified London reinsurance market figures to comment on the war for talent considering Richardson’s involvement in a number of controversial team moves, including a fac team defection from Benfield to Aon that sparked a profit warning from the UK firm in 2006 and a current dispute with Guy Carpenter that sees him and Howden Group founder David Howden as named defendants over a 38-strong European walk-out earlier this year.
But Richardson said: “Just hiring account handlers or producers to grow revenues is not a strategy.
“They must be able to bring value to the overall culture and business and do things they never did before.”
He suggests flexibility by employers, and adapting roles to sets of skills to build organisations for the future.
“Having a single P&L/aligned incentive model is crucial to allowing clients access to a full suite of capabilities in a harmonised way.
“It is imperative to identify people to come and join the business to ‘score runs’ in a way they never did at their previous jobs,” he continued, although he acknowledged “it won’t be easy for the wider broker world to make this change”.
The executive believes lines between traditional insurance and the new world order are becoming increasingly blurred, noting that nimble MGAs, utilising fronting carriers and alternative reinsurance capital, are stealing a march on the less-flexible incumbents. Although he added that incumbents are starting to look to add these elements to their own businesses and adapt their models, and expects this to gather pace.
However, in a nod to the traditionalists in the market, he notes that “the ability to underwrite and place challenging business remains key”.
The executive, whose broking career started in the 1980s, has no time for standing still though, predicting: “The next five years may bring more change to the industry than the past 25.”