Ex-Willis Re CEO Cavanagh welcomes WTW return to reinsurance broking

WTW will need to recruit a CEO with extensive reinsurance brokerage experience if it is to make a success of its rumoured return to the treaty reinsurance space, according to one of its former stalwarts.

John Cavanagh led Willis Re as global CEO for nine years until 2017, when he co-founded Beat Capital as chairman.

Four years after Cavanagh’s retirement WTW offloaded its reinsurance arm to Arthur J Gallagher in a $3.25bn deal.

And with The Insurer revealing late last week that WTW is now poised to return to the reinsurance broking space through a joint venture with Bain Capital, Cavanagh said he still can’t grasp why WTW sold Willis Re three years ago.

“I can understand why they want to get back. If I'm being honest, I've never understood why they sold it in the first place,” he said.

“That was a great shame from my perspective, because having been a participant in helping build up that franchising platform, I found it a very curious move.”

“It was their loss and Gallagher's gain, so fair play to Gallagher – but I can understand why they want to get back in.”

However, the former Willis Re CEO believes WTW’s re-entry to the reinsurance space will be “quite a challenge”.

To make a success of the move, Cavanagh believes it is critical that the CEO of the new venture have a strong reinsurance broking background.

The proposed WTW Re II was one of the main topics of discussion at this year’s Rendez-Vous in Monte Carlo, amid speculation that the broker would need to look to a reinsurer to find a suitable candidate for CEO, given the shortage of top-tier broking talent..

Speaking to The Insurer TV on the sidelines of the Rendez-Vous, Cavanagh emphasised that the new CEO must have deep experience in broking.

“It would need to be somebody that has been around in the reinsurance brokerage business and gets it,” he said.

“The broker business and managing brokers is quite nuanced. I'd say I think it needs to be somebody that's been around the insurance brokering business; that understands brokers, has managed brokers in the past, that has had client relationships universally, internationally, that they can capitalise on. I think with those skill sets, you've got a proper leader,” explained Cavangh.

Cavanagh acknowledged that finding the ideal candidate would be challenging, especially as many of the obvious choices would be difficult to prise away from existing roles.

“You've got to look at it on the basis that there are some very senior people in the market that are very, very heavily locked into some pretty watertight contracts.”

“The big producers in the market earn a huge amount of money and are very well rewarded. You've got to try and create awards or rewards that match or better that,” he noted.

Bain Capital seems like the right fit

Bain Capital, which was the main backer of Cavanagh’s MGA platform Beat Capital until its majority stake was sold to Ambac in June, is the likely capital backer of the new ‘WTW Re’ vehicle.

As revealed by this publication, market sources suggests that Bain will provide the capital, while WTW will hold a minority stake, effectively "renting" its brand, leveraging its retail book of business and utilising its analytics capabilities

Cavanagh understood WTW’s decision to pursue a private equity route, as it would allow it to keep the venture off its balance sheet and thereby maintain the momentum gained since its failed Aon merger.

“It seems like Willis prefers to partner with someone to defer the initial startup costs of such a large-scale venture. And I understand that, given the strong momentum they currently have,” said Cavanagh.

He also recognised why the venture capital-light nature of a reinsurance broking business, would suit Bain capital tastes.

“I can certainly see it from Bain's standpoint. Private equity, at the moment, is more interested in non-balance sheet ventures – that will be MGAs, that will be anything with a thin P/C flow.”

“Brokers obviously are in that wheelhouse. So, I can understand it from Bain's perspective, if indeed this is all true.”

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