James Wrynn is set to change the dynamics of transatlantic reinsurance by creating a Lloyd’s-style exchange in New York. David Banks speaks to Wrynn and finds that his collaborative style might just make the idea work.
In just under two years’ time, New York insurance superintendent James Wrynn hopes to cut the ribbon on a newly created insurance exchange – something resembling a Lloyd’s in New York. Whether it will happen is almost beyond doubt, as plans are already well-advanced. Whether it really takes off is a different question.
But life-long New Yorker and insurance lawyer Wrynn is keen to pre-empt any doubts long before the launch party and, since stepping into his new office in mid-2009, has been building the pillars that will allow the project to stand up.
Plans were shelved by Wrynn’s predecessor Eric Dinallo when the financial crisis hit. But although Wrynn has inherited the basic blueprints from Dinallo, he is keen to make the concept his own and has brought a very different style to the project. His approach brings with it a careful diplomacy, which is in complete contrast to his predecessor’s steamroller tactics.
Wrynn has seen the opportunity to ‘accommodate’ rather than ‘dictate terms’ in his dealings with the big insurance brokers over contingent commissions, for example. He says he wants to “strike the right balance” in a way that would allow commissions, provided they met legal requirements and were fully disclosed to the client.
Full steam ahead
“I want to investigate the idea and establish whether there is a need for a New York insurance exchange and how it would happen,” Wrynn says, answering criticism that New York was becoming carried away with its own ambition before establishing a market need.
But Wrynn is confident about the outcome of such investigations. “When I first heard about the idea for a new insurance exchange, I thought it would be a great thing for New York,” he asserts bullishly.
In fact, Wrynn is not waiting for the results before assembling a battery of financial and political supporters who would make the exchange a reality. He has allocated a “significant portion” of the superintendent’s resources to the idea and appears to have the political clout and connections to bring about change. Although
his rapid rise to New York insurance superintendent happened in the space of a few summer months in 2009, he has been a political mover and shaker since accompanying Bill Clinton on a visit to Ireland in 2000.
Wrynn’s plans for the New York insurance exchange (NYIE) have not yet reached the highest echelons of government, but he is confident that “if we can come up with a clear vision and articulate it well, the government will be supportive at every level”.
He believes any syndicate-style market cannot start small but rather must have significant competences and financial support right from the beginning. Supported closely by his capital markets guru Mike Moriarty, Wrynn’s department has already succeeded in recruiting the support of private equity firm JC Flowers & Co.
Back when he was holding the reins, Dinallo had spoken of the “boldness of investors to place money in insurance”. But times have changed and, understandably, Wrynn is guarded when it comes to talk of gaining financial support. “I absolutely feel there is a role for the capital markets,” he says. “The interest by the capital providers has been encouraging.”
Silencing the doubters
Technologically, the exchange must provide something additional but compatible with what already exists. “It will be a technologically advanced platform and a more efficient way of doing business,” Wrynn says. “The goal is not just to take business back, because that would not bring any benefit to the industry.”
One fixed plan that has come from the initial investigations includes the proposition that the exchange would provide a gateway to US business: “national marker without a federal charter”. Another is that it should begin as a market for complex risks, such as reputational risk, cyber security, terrorism and climate change.
He admits that the naysayers are not in short supply, even in the US insurance industry; the Reinsurance Association of America, which sits on several of the NYIE committees, has voiced doubts. And brokers and underwriters have asked how it can work without measures to mitigate the tax advantage of offshore domiciles.
Typical to Wrynn’s diplomatic style, he has brought opponents into the decision-making process rather than dogmatically press ahead without their support. “You are always going to have people out there who have doubts,” Wrynn says. “My job is to encourage the discussion, not to stifle it.”
Such quiet confidence does not mean Wrynn is not averse to gaining some of the acclaim the exchange is likely to bring, of course. The prospect of being the person responsible for bringing such an initiative to New York must be a very attractive one. GR