"The increased pace of change and the corresponding changing nature of risk makes the role of insurers all the more vital"
XL’s Group Chief Executive Officer Mike McGavick tells FULLCOVER all about his company’s stance on talent management, catastrophic risks, and other issues affecting insurance today. Find out the motivation for XL’s recent rebranding and discover this seasoned insurance leader’s thoughts on where the industry is headed in the years to come.
What made you choose to work in the insurance industry?
I have always been drawn to things that are misunderstood – and that certainly applies to the role of insurance in society! Fairly early in my career, I worked in Washington D.C. with the American Insurance Association on a project to help reform environmental liability laws in the U.S. That experience was a quick primer to the industry and I was struck by the fundamental role the industry plays in society, by the talented people who work in it and by the ever changing landscape in which insurance operates and the evolving set of problems and risks involved.
Since then, my career has been spent at a handful of insurance companies – each with a distinct set of challenges that needed solving, including turning around Safeco, a provider of personal lines policies in the U.S. and now implementing a new and differentiating strategy at XL since I became Chief Executive Officer in 2008.
Since then, my career has been spent at a handful of insurance companies – each with a distinct set of challenges that needed solving, including turning around Safeco, a provider of personal lines policies in the U.S. and now implementing a new and differentiating strategy at XL since I became Chief Executive Officer in 2008.
Can you share with us the major cultural changes you have implemented at XL during your leadership and what are your key considerations to keep moving the company in your desired direction?
There have been a number of changes that we, as a Leadership Team, have implemented to move XL forward, from alignment of our businesses to a clearer definition of our culture and values. The starting point for our current strategy was a deep examination of the factors shaping the world today, including the need to win the fight for the best talent, the way technology is a true game changer for all things, and how the pace of change is faster than ever before.
With that understanding, our strategy then became about reorienting XL toward the space where we have historically excelled – unleashing the potential of our clients through risk solutions, particularly complex risk solutions. We are empowering the leaders of our businesses by making them and their underwriters the focal point of operations, with all other functions supporting their efforts.
With that understanding, our strategy then became about reorienting XL toward the space where we have historically excelled – unleashing the potential of our clients through risk solutions, particularly complex risk solutions. We are empowering the leaders of our businesses by making them and their underwriters the focal point of operations, with all other functions supporting their efforts.
This is a big cultural shift for the company – an inverting of the traditional company organizational chart, placing the underwriters at the top. We have focused on our culture by clarifying our brand and our values in a way that is truer to the company we are today. And significantly, we have focused on clear and consistent communication to help our colleagues understand both our vision and the journey we are on.
What would you say are the major strengths of XL today?
Many attributes set XL apart from our peers. Our size, for example, is a true attribute. We are small enough to be incredibly responsive to the needs of our clients and brokers while at the same time we have the footprint of a truly global enterprise. We place the highest premium on innovative ideas and new solutions to both emerging and ‘routine’ risks. And our culture and values are distinctive for our industry.
But, XL’s major strength has always been the differentiation we make through solving complex risk solutions for our clients. The company itself was founded as an answer to the, then un-solved, 1980s liability insurance shortage crisis in the U.S. Much of our recent progress has been made by reasserting this focus.
But, XL’s major strength has always been the differentiation we make through solving complex risk solutions for our clients. The company itself was founded as an answer to the, then un-solved, 1980s liability insurance shortage crisis in the U.S. Much of our recent progress has been made by reasserting this focus.
Every company today is saying that talent management and even further junior talent management are key components of their HR management. What is XL doing in this field to attract and retain the best talent in the industry?
Both management and recruitment of talent is essential to our strategy. The first step is to have a truly distinctive offering as a company – confidence that the vision, culture, and benefits of working at your company cannot be matched by your peers. And we have been incredibly successful at attracting some of the best minds and teams in our industry to join our ranks.
But this is an area where our industry as a whole must focus. For insurance, there is always a bit of a hurdle in helping talented people understand just how truly meaningful and exciting the insurance industry can be. It seems most come to the industry by accident or other happenstance.
There is a reason that young people aspire to work at Apple or Google – they are distinctive brands making outstanding accomplishments in fields that impact society.
Insurance is just as essential, but the industry has not always done as good a job in promoting our value to the world or in making the opportunities that come from working in the industry as apparent. On the surface it’s a harder sell. But the longevity of people in the industry points to the fact that the benefits of the work quickly become apparent. That should be better exemplified for the next generation.
There is a reason that young people aspire to work at Apple or Google – they are distinctive brands making outstanding accomplishments in fields that impact society.
Insurance is just as essential, but the industry has not always done as good a job in promoting our value to the world or in making the opportunities that come from working in the industry as apparent. On the surface it’s a harder sell. But the longevity of people in the industry points to the fact that the benefits of the work quickly become apparent. That should be better exemplified for the next generation.
What role do emerging markets play in XL’s strategy?
You cannot be a remotely sophisticated global company today without realizing the impact and potential of emerging markets. This of course is not a new story but the dynamic between markets and capital centers is shifting all the time. We are constantly looking at new geographies for XL and at markets where we think there is an opportunity to further serve our clients. In the last two years this has meant expansions of our operations in China and Brazil as well as establishing new internal programs to better facilitate researching and implementing opportunities in additional markets.
In 2011, XL Group unveiled its global rebranding with a new logo and "Make Your World Go” advertising campaign. What is this all about?
The brand and our advertising captures the powerful combination of talent, innovation and drive at XL and our commitment to advancing progress and helping clients to do the same. There is no progress without risk. And in an environment where change is accelerating, risks are multiplying and businesses are increasingly complex, companies need strong, innovative partners to help manage their risk. Our brand clearly sets XL apart as a strong, innovative partner focused on moving the world forward – the kind of partner we feel is needed in today’s markets. The brand thereby demonstrates our unique outlook and the commitment and value we bring to clients: By helping our clients unlock their full potential, we fulfill our own.
You have recently strengthened your US Risk Management team. What is the role of this team in XL’s underwriting process?
Yes, we expanded the US Risk Management (USRM) team as part of our general growth strategy to expand where we see both untapped opportunity and to further meet the needs of our clients. The USRM teams’ knowledge and relationships in the marketplace are extensive and will be invaluable to us as we strengthen our broker relationships and our reputation for creatively addressing large complex casualty accounts. The expanded team will also assist our regional underwriting teams in addressing various captive fronting, single parent, small group captive, and other unique risk management account opportunities.
In the past two years, risk managers, insurers, boardrooms and world leaders have been concerned by the interconnectedness of risks across the industries and regions of the world. How do you see the role of insurers to help companies and the world better manage the ripple effects of catastrophic risks?
Growing interconnectedness, the increased pace of change and the corresponding changing nature of risk makes the role of insurers all the more vital – perhaps more so now than at any other time. And the more that we become strategic partners in helping our clients understand their risk , in addition to helping them transfer and mitigate their risks, the more we will fulfill our role and increase the relevance of our sector.
Growing interconnectedness, the increased pace of change and the corresponding changing nature of risk makes the role of insurers all the more vital – perhaps more so now than at any other time. And the more that we become strategic partners in helping our clients understand their risk , in addition to helping them transfer and mitigate their risks, the more we will fulfill our role and increase the relevance of our sector.
Do you see governments, major companies and organizations working together to create innovative risk management and risk transfer solutions for our world to sustain large scale disasters of all kinds?
We have seen these conversations begin to take place. Unfortunately, they usually commence only following a large catastrophe. But the perception of risk – particularly around large-scale natural catastrophe risk is changing.
Events like the Thailand floods in 2011 or Storm Sandy in the U.S. in 2012 should make us all question the concentration of economic activity in vulnerable areas and the sustainability of long-held practices such as just-in-time manufacturing and supply chain resourcing.
The recent increase in both the severity and frequency of events provides the right opportunity for these conversations to happen in earnest and for the insurance industry to lead the way.
Events like the Thailand floods in 2011 or Storm Sandy in the U.S. in 2012 should make us all question the concentration of economic activity in vulnerable areas and the sustainability of long-held practices such as just-in-time manufacturing and supply chain resourcing.
The recent increase in both the severity and frequency of events provides the right opportunity for these conversations to happen in earnest and for the insurance industry to lead the way.
What is your view on the world economy and outlook for the insurance industry in general and for XL specifically?
Our view of the global economy is probably not vastly different than most that are looking at the big picture right now – conditions seem to be steadily improving, albeit at a slower rate than was hoped for or expected. There remain pockets of opportunity throughout, but conditions on the whole are challenging. And there is a corresponding, but in our estimation, too gradual increase in rate pricing.
Therefore, at XL, we have continually evolving scenario tests to react to changing conditions and we focus on what we can affect the most – our position within the insurance industry.
We also ask some fundamental questions about the industry itself, the answers to which are directly related to our strategy and how XL is moving forward. Namely, in a global economy, changing at lightning speed, how do we keep up? What is the relevance of our broader industry? How are we making XL increasingly relevant to our clients?
The fact is that from both an economic and an innovative perspective, our industry is becoming less relevant. Now, you could assign a lot of causes to this decline. But for me, there is one overriding concern that is particularly critical for our industry and for XL. Our industry has failed to innovate as fast as the clients we seek to serve and therefore we are of decreasing relevance to their companies, to their lives, and to the economy as a whole. To address this decline there are steps that we should take as an industry – areas where I believe XL is well on its way to being the company to lead resurgence in our industry’s relevance.
The fact is that from both an economic and an innovative perspective, our industry is becoming less relevant. Now, you could assign a lot of causes to this decline. But for me, there is one overriding concern that is particularly critical for our industry and for XL. Our industry has failed to innovate as fast as the clients we seek to serve and therefore we are of decreasing relevance to their companies, to their lives, and to the economy as a whole. To address this decline there are steps that we should take as an industry – areas where I believe XL is well on its way to being the company to lead resurgence in our industry’s relevance.
First - this is something we know well – ours is a talent business and we need the best minds on our toughest problems. Our progress here is visible in the talent we retain and in the new teams we’ve recruited.
Second, understand that the periods of long data sets over time are finished. In the length of time that it took before we trusted a product, whole industries now will come and go.
We must push ourselves to be willing to take appropriate risks to move the ball forward. And that doesn’t mean we act recklessly. We will, of course, continue to work in reliable profit generating lines of business alongside the new innovations we pursue - always done with the right guardrails in place to protect the overall success of the enterprise. And third, the traditional methods simply will not keep up. We must search for the parallels—the adjacencies—and use the volume of data available as our friend. Our work to increasingly deploy strategic analytics, such as the new tool made available for our private D&O clients, is a real proof point.
Second, understand that the periods of long data sets over time are finished. In the length of time that it took before we trusted a product, whole industries now will come and go.
We must push ourselves to be willing to take appropriate risks to move the ball forward. And that doesn’t mean we act recklessly. We will, of course, continue to work in reliable profit generating lines of business alongside the new innovations we pursue - always done with the right guardrails in place to protect the overall success of the enterprise. And third, the traditional methods simply will not keep up. We must search for the parallels—the adjacencies—and use the volume of data available as our friend. Our work to increasingly deploy strategic analytics, such as the new tool made available for our private D&O clients, is a real proof point.
All in, I am supremely optimistic that the industry will overcome these challenges.
In which parts of the world does XL see their largest growth potential for the next 5 years?
When we think about the future for XL, we really do look at the entire world – globalization and the pace of change mean you cannot ignore any single market. But, in particular, we’re very excited about our recent expansion in Latin America and in Asia. The potential in these markets is truly staggering and we’re excited to continue building those operations.
What challenges do you see for independent brokers and on the other hand, what in your opinion are the benefits we offer to our clients and to XL?
Consolidation of the brokerage industry is likely to continue and will only make it more difficult for independent brokers to gain footholds in the overall market. However, the opportunities for independents to distinguish themselves through quality of service, knowledge of local or underserved markets, or specialization of services remains strong. These are essential offerings to both clients as well as companies like XL.
