Staying the course
In any period of great change, in any industry, all companies seek the guidance and inspiration of their leaders to help them navigate what can be challenging times. The reinsurance industry is no different—and it is certainly experiencing a period of fundamental change.
Navigating this for Markel Global Reinsurance is, unusually in the structure of reinsurance companies, not one leader but two. What is more, neither is your typical reinsurance CEO.
Peta White, 44, managing director, head of North American property reinsurance, and Andrew (Barney) Barnard, 46, managing director, head of international property catastrophe and retro reinsurance, are joint leaders of the business and work together on its strategic direction and future.
Both are young; they have families and busy home lives. That White is a woman is no longer something that is highly unusual within boardrooms in the industry but, in what remains a traditional and old-fashioned business in so many ways, it is certainly not as common as it should be.
In many ways, White and Barnard reflect a new generation of leadership coming in to an industry that is reshaping rapidly, driven by market forces that must be adapted to rather than controlled. The drivers are well known: an influx of new capital using new forms of risk transfer and structures combined with minimal catastrophe losses for many years has forced rates through the floor. In turn, this has prompted consolidation on a scale not seen in the industry for a long time—if ever.
Both executives emphasise the need to be aware of the nuances in the industry. Although the industry certainly is changing, its old values still reign true in many parts of it and for many clients, it is a question of balance.
“It is traditional and there’s still an element of ‘my word is my bond’, but there are also new traditions coming in with the alternative funds,” says Barnard.
Markel is a family-oriented business—it’s family first, business second, which is a lovely place to be. Not only that, it brings the best out of everyone.” Andrew Barnard
“They have a different way of doing business, but whether this will become tradition—who knows? There are some lovely traditions within the business still, but it’s much more flexible than it used to be.”
White agrees. “There’s definitely an evolution, and the traditions will always be there, but there are some pockets of change appearing,” she says.
“This leads on to the M&A activity that’s going on with regard to companies trying to compete with this evolution.
Companies need to find scale, diversification and a broader product offering, and that’s where we’ve got to post our two mergers.”
Been there, got the T-shirt
While other companies are now forced into consolidation by market forces outside their control, Markel might well argue it was well ahead of the game in adjusting and strengthening.
The company became what it is today first thanks to the merger between Max Capital and Harbour Point in 2010 to create a $3 billion company in terms of its capital, which became rebranded Alterra Capital. Markel Corporation then boosted its reinsurance presence by acquiring Alterra for $3.1 billion in 2013.
Since then, the company has grown and consolidated its market share steadily. Last year, boosted by the Alterra deal, the reinsurance business wrote gross written premiums of $1.1 billion, compared with $566 million the year before, and posted a combined ratio of 96 percent, compared with 109 percent in 2013, something that was partly driven by favourable development on prior year loss reserves.
It noted in its 2014 results that market conditions in reinsurance were getting tougher and said it would walk away from unprofitable business. Having already completed a scaling up of the business through M&A activity, it now has no distractions or agendas—its leadership team can focus purely on profit and securing the right business.
“There was lots of talk of M&A two years ago, but no-one else was really doing it except us—it was a bit lonely out there,” White says. “But it has been worth it when you look at our scale and market offering now. We can just get on with running the business with no distractions.”
Barnard adds that Markel’s wider reinsurance offering since the Alterra deal has been accepted very quickly by the market.
“The market has accepted Markel and we’ve moved on very quickly in a very seamless process,” he says. “Markel management understood this and that has allowed the whole company to continue to march on as a business.
“However, there have not been any big losses and there has been a huge amount of capital seeking yield. This has forced many re/insurance companies to seek diversification, but this is all stuff that we did two years ago. As a result we are well positioned now.”
The two leaders say there are a couple of factors that set Markel apart in an increasingly competitive market. One is the company’s structure that allows it to cross-sell into the US—this is something that has paid dividends, says White.
“One of the key advantages has been Markel’s ability to take the opportunity of cross-selling,” she says. “When Markel bought Alterra, they chose to make us a US tax-paying company.
“That means that, unlike our Bermudian peers, we can travel and market in the US, as state law permits, which has allowed us to broaden our relationships with clients and brokers—and we’ve certainly used this advantage to offer bigger lines and a broader suite of products.”
Barnard adds that the company’s ethos of working together has proved invaluable time and time again. He says that the different offices collaborate and complement each other’s offering, rather than compete.
“Generically, Bermuda likes to put itself up as the best cat market in the industry as it can offer large cat lines, and that’s how we work at Markel—the bigger lines out of Bermuda and the smaller ones out of London,” he says.
“We work very closely with the London office. We work together, which I know is something that does not always happen in other companies where they compete in the same space.
“We travel with the guys from London and maintain a great relationship, which has been a big plus point of the acquisition.”
"It has been worth it when you look at our scale and market offering now. We can just get on with running the business with no distractions.” Peta White
White stresses that the key to such a system working effectively is good communication.
“I think a lot of companies struggle with communication, but Markel works hard to keep the communication lines open not just as an update, but to make sure that we can sell more to our clients,” she says.
“This brings us back to the point of cross-selling—an area that we are actively targeting. We have meetings every few months and go into great detail, client by client, to maximise business, and this has really paid off since the acquisition.”
A wider perspective
It also helps, they say, to be part of a bigger group because of the diversification it offers. Reinsurance still represents only around 25 percent of Markel’s overall portfolio, meaning less pressure to do deals and a greater ability to walk away when business is not priced adequately.
“It takes some of the pressure off in this diminishing market,” Barnard says. “We don’t feel the pressure to reach the heavy heights of some of the others. We do what we feel is right and we’re under no pressure to do anything against that.”
White adds: “Our team in Bermuda is very lean, but they have a lot of experience and they’re passionate about what they do, which means they listen to the clients, which ultimately generates business.”
The industry is changing in other ways. Most reinsurers have now developed their own structures when it comes to both access to and the ability to manage third party capital. Thanks to the Alterra deal, the company owns a sidecar called New Point Capital. Barnard says the vehicle remains successful but also notes that this side of the market is evolving.
He also notes that he believes reinsurance—although changing in part thanks to the proliferation of new types of capital and models entering the industry bringing with them different cultures—remains at its heart a very different business from the investment bank model it works closely to on these structures.
“We as Markel haven’t seen a big culture change thanks to the influence of investment banking but maybe it is happening somewhere in the market,” he says. “Personally, I think reinsurance is a softer business than investment banking. Markel is a family-oriented business—it’s family first, business second, which is a lovely place to be. Not only that, it brings the best out of everyone.”
This has been true of their own relationship, the executives say. In any situation involving joint leadership, a good working relationship is vital.
“Peta and I began working together in 2010 when Peta was on the international side, and I worked very closely with her,” Barnard says. “It could have been nasty with us both competing for the same business, but we worked very well together.
“Peta went across to the US, and then came back, and now we’ve gone around the roundabout and met on the other side. In terms of style, Peta and I see eye to eye on everything. Having two people work together is a challenge, but personally, we work very well.”
White agrees: “We have different styles, but what makes us work well together is that we interact as a team. If one of us hasn’t thought of something, usually the other one has.”
A good balance
Although changing, reinsurance remains a male-dominated profession, especially at the higher levels of the boardroom. White and Barnard at Markel acknowledge this and believe their own combination brings a good balance to the company.
White admits she has experienced a few tough moments in her career, which happened simply because she is female. But she feels things are now changing in the industry.
“There have certainly been a few hard times,” she says, “but I like a challenge and this only made me want to fight even more. I feel that this marketplace embraces women and I have been given a lot of opportunities. It hasn’t been particularly hard for me, but I know that for other women, it has been challenging.”
Barnard agrees that reinsurance is underweight with regard to women in the boardroom. But he too believes this is changing, which he welcomes.
“I’ll often look around and think that the industry is underrepresented in terms of women, but in Markel, we have a significant number,” he says.
“I like women in the business; it takes a lot of the testosterone out and encourages a nicer working environment.
“It’s not necessarily easy for women, but with regard to Peta, she’s been an Olympic sailor [she represented Bermuda in the 2004 Olympic Games] and she’s tough.”
Differences still exist. White says that women still have to ask for what they want, whereas this might not be the case for men. But she adds that Markel is a fantastic company to work for. “It’s very family-oriented; there is a fairness that they bring on all levels,” she says.
Barnard adds: “I don’t disagree with Peta at all, but in this day and age, everyone has to ask. Promotions no longer come along just because people have worked together. We are surrounded by hard-edged businessmen and women, but it has taken me 20 years to work for a company like this one.”
Barnard, who previously worked as a broker at Willis, stresses that whether it is men or women operating in the industry, it is all about building relationships and doing business in the right way.
“Reinsurance is almost an address book business. Anyone who thinks they can come in and be the next ‘big cheese’ might come unstuck. It’s a business built on trust, and you have to earn that trust,” he says.
He has three bits of advice: first, don’t burn any bridges. “It’s a small business and more often than not, you come around to the same people,” he says. Second, don’t reinvent the wheel, which he says is “very relevant today with everyone trying to build these derivatives out of products”.
Finally, he says, his father once told him that the key is to think one step ahead of your boss. “Always know your numbers, so if your boss asks you what the business could possibly lose in one area, you can tell the boss instantly,” he says.
White has one simple tip: “The best piece of advice I was ever given was to make yourself invaluable. I have held this advice close to me throughout my career.”