Bob Clements: an enormous agent of change

01-10-2010

Bermuda Re

Bob Clements: an enormous agent of change

Bob Clements laid the groundwork for what would emerge as a multibillion dollar industry. Bob’s ideas were central to the success a host of headline names in reinsurance, and his loss will be keenly felt.

The reinsurance industry was greeted last month with the sad news that Bob Clements had passed away in Stamford, Connecticut, on September 5, aged 78. Widely regarded as an industry icon and a pioneer of companies domiciling in Bermuda, he was instrumental in the establishment of a host of ventures from ACE, XL and Mid Ocean, to Arch Capital Group, Integro and, most recently, Ironshore.

Bermuda Re/insurance spoke with Jack Byrne, retired chairman of White Mountains Insurance Group; Kevin Kelley, chief executive officer of Ironshore, and Ron Sandler, former chief executive at Lloyd’s, about the leading role that Clements played in establishing Bermuda as a centre for reinsurance, his significance in developing the industry and his lasting legacy to the reinsurance industry.

From liabilities to cats

“Bob’s tremendous contribution was that he saw before anyone else did in the 1980s that insurance companies were being very badly hit by the growth in liability claims. This was because prices set in the sixtiesand seventies were only fully realised in the eighties, and when they were, they were 20 times what the actuaries had predicted. Suddenly, it was almost impossible for large US companies to get substantial amounts of liability cover. The companies of the Dow just couldn’t find liability insurance,” White Mountains’ Byrne explained.

“And it was Bob, then head of Marsh McLellan, whose job it was to line up risk with coverage, but he couldn’t do it. So Bob—pretty much alone—came to the idea that, wait a minute, let’s go to Bermuda and offshore. Bob figured out that if he could get capital from outside of the usual sources and put it in Bermuda, he could then specialise in both medium and big layers of reinsurance coverage. And so it was Bob’s guiding hand that saw the creation of leading players such as XL and ACE, ” said Byrne.

“ACE and XL went on to achieve significant success, despite a lot of people thinking that they would only ever be taking the dirty laundry of trial lawyers. And they brought a lot of capital to Bermuda and began employing significant numbers of people on the Island,” Byrne continued.

"Bob saw a problem and was able to envisage a solution to that problem. He saw it deeper and clearer than anybody else."

“The next big wave of opportunity came when Hurricane Andrew swept through Florida in 1992, causing far more damage than the industry had ever seen. The industry found that it had vastly underestimated the amount of damage that a single event could cause to property. And there was Bob again, thinking outside the box. He thought that what had been done for liability insurance might also be possible for property cat insurance. He recognised a need of enormous proportions, and went out and raised capital to establish Mid Ocean, the first specialist cat reinsurer established in the aftermath of Hurricane Andrew. It was off and running in 1992, and another seven or eight followed over the next two to three years,” Byrne concluded.

Talking with Byrne, it is clear that Clements’ outstanding ability was in identifying the needs of the insurance industry and of Marsh McLellan’s large clients—both for liabilities coverage and then property cat coverage—and coming up with solutions, in which Bermuda played a central role, but he also brought an outstanding depth of perspective.

A depth of perspective

“The chief thing that Bob brought to any problem was his perspective. His perspective was one of a broker first—who saw the market from the standpoint of the client—but this perspective was coupled with his knowledge of how insurance companies and the capital markets operate, giving him the unique ability to see opportunities where other people did not,” Kelley of Ironshore said.

Ron Sandler concurred: “Bob possessed a remarkable ability to anticipate developments in the global P&C industry. He could see the whole landscape and how it was likely to evolve far more clearly than anyone else around. Bob was more than just a visionary. He was able to translate his perspectives into commercial opportunity. He could bring together people, capital and ideas to create enormously successful enterprises. He was the driving force behind the development of the Bermudian insurance industry.”

An industry visionary

Talking with senior figures in the industry, it is apparent that Clements was a visionary for the sector, able to anticipate the needs of the industry and, more importantly, recognise and come up with solutions.

“Bob saw a problem and was able to envisage a solution to that problem. He saw it deeper and clearer than anybody else. And more importantly, he knew how to organise capital and people, and get an enterprise up and running so that it could solve the problems he saw so efficiently. Some people see a solution, but they don’t know how to solve the problem from a practical standpoint. Bob saw the whole picture,” Kelley said.

“Bob had a broad world view, and approached the insurance industry with a global, and not a regional, perspective. He understood how the various regions interconnected and, in particular, the roles played by Lloyd’s and the London Market. A significant part of his success rested on his understanding of the connections between London and Bermuda, and Bob will always be associated with the Island,” Sandler said.

His legacy

Clements’ legacy—both in terms of the host of companies that he established and the new ways of doing business that he brought to the industry—is significant.

“Bob thought to change the 150-year-old ways of doing business that had perpetuated the industry. Lack of change had, in many instances, cost the industry, and it was really Bob in the early eighties who realised that we had to change quite drastically the way capital supports certain risks. He changed the nature of the corporations, the amount of capital used and the financial applications of it all, bundling the risks in new ways to fit what he had created. That is his legacy,” Byrne said.

“He learned how to match those real bundles of risk presented to him by his clients, with new capital that would protect those risks in new ways. The companies were new, the managements were new, the geographies were new and the way he packaged the risks was new. He was an enormous agent of change,” Byrne concluded.

Final thoughts

Talking with all three senior figures, it is evident that quite apart from being a giant to the industry, Clements possessed enormous personal qualities widely felt by those in the industry.

“He was a wonderfully engaging character, with a great sense of humour. Conversation with Bob was a real treat, and proceeded with Bob’s unique rhythm and his characteristically measured delivery, never failing to yield insight and clarity of the highest order,” Sandler said.

“Building a series of outstandingly successful businesses takes more than just vision and insight. It takes determination, commitment, courage and personality. Bob had these attributes in abundance,” Sandler continued.

“A fantastic broker with an immensely loyal following. I never met anyone who didn’t like Bob Clements,” Byrne said.

“A great guy and a great businessman. Most of us feel his death as a personal loss. He was a guy who you just enjoyed being around,” Kelley concluded.

Clements is survived by his wife, Marilyn, and four children.

obituary, Clements, Bermuda, reinsurance

Bermuda Re