High profile staff defections have highlighted a shortage of top talent, says Mairi Mallon. But some companies believe poaching key employees is not the only way to secure the best individuals.
News that two senior players in Guy Carpenter's facultative (GC Fac) team had jumped ship to start-up insurance brokerage Integro surprised many and became the market's juiciest piece of gossip last month. But in reality the defection of the dynamic duo of Julian Samengo-Turner and Ron Whyte plus Marcus Hopkins, head of GC Fac's UK facultative operations, and more recently Charles Waddington, GC Fac's managing director and head of worldwide casualty, should have surprised no one. A real shortage of talent at the top means the only way forward for many companies looking to grow and expand is to poach staff.
Not that anyone likes to call it poaching. "Moving on" is among the preferred terms used to avoid aggravating the legal battles going on behind the scenes. And these battles can be costly, as Aon found out too late after 20 senior members of the facultative solutions team at Benfield quit their posts to join the group. Under an "amicable" settlement, Aon agreed compensation of £9.5m to Benfield and last month set up Aon Re Global Fac to house its new arrivals.
Guy Carpenter has assured clients that its own departures will not disrupt services and it remains fully committed to the global facultative marketplace. But there is no doubt that GC Fac, set up in 2005 by Samengo-Turner and Whyte, has been decimated.
Management is said to be furious and insiders say they have been trawling through all correspondence for any hints of foul play. If evidence is found, no doubt a lawsuit will be filed shortly. Meanwhile, Whyte and Samengo-Turner are on gardening leave until October, when, if all goes to plan, they will start working on Integro's first reinsurance arm.
But the talent crunch extends beyond the world of fac. It has been repeated across the reinsurance and insurance market, not only due to the stream of mergers and acquisitions since the 1990s, but also due to growth in the number of new companies, such as the Bermuda start-ups of 2001 and 2005. Add to this the prevailing mood of the 1980s, when university graduates were regarded as too "high falutin'" to be salespeople and there was a shying away from anyone with good academic qualifications. The market is now paying the penalty. "There is a definite shortage of talent," said Freddie de Lisle, senior partner at the Torus Partnership, which finds board members and executives for insurance and reinsurance companies. "This is because there has been a reduction in the number of players due to consolidation over the past ten or 15 years, which means we have a much smaller pool to select from."
Torus is hunting for a very senior underwriter, and reports that the insurance world offers few suitable candidates with the right blend of skills. De Lisle said the search for talent increasingly takes them into other traditional financial services such as banking, and also industry sectors that appear to have little in common with reinsurance - especially those with transferable skills, such as information technology. "But when you come back to compliance and regulatory issues, you need to hire good people. It is not easy to find the right calibre."
The post-Katrina startups in Bermuda, known collectively as the Class of 2005, faced huge problems getting the right kind of staff when they were actively recruiting simultaneously. Potential senior employees had to be willing to move to the island, while companies were alert for a repeat of the en-masse poaching that occurred after the post-September 11 terrorist attacks (to staff the Class of 2001 reinsurers). Many inserted clauses in employment contracts to make it more difficult to move. Local staff in Bermuda are also scarce. There is over-employment on the island and the jobs market is fiercely competitive, with professional assistants paid up to $100,000 a year plus benefits, tax-free. Robert Childs, chief executive of Hiscox Bermuda admits recruiting is tough, but said his company is prepared. "This is a small place, so there are always going to be difficulties. We openly go out to recruit Bermudians, but there is a limited pool, so you do what you can."
One Bermudian company with a strong track record in recruitment is Allied World Assurance Company. When it started out in 2002 to take advantage of a shortage of insurance and reinsurance after September 11, there was still a dearth of Bermudian and non-Bermudian staff. The response of then chief executive Michael Morrison was to "think out of the box". He started by luring existing staff away from established players such as ACE and XL Capital, offering them a lot more input into the business and attractive packages.
Morrison also noted that many women had left the industry to start families. He persuaded many to revive their careers, by offering flexible working that fitted in with school hours and support for working from home. While the problem of attracting and retaining staff is particularly acute in Bermuda, the problem affects other locations and sectors. "The structure of the business has changed with the increased use of electronic transfer," said Chris Harman, deputy chairman of independent Lloyd's broker Harman Wicks & Swayne. "This means that at the bottom of the rung, people learn the basics quicker and skills are more transferable from other sectors."
There is a downside. New techniques and restrictions on what newcomers can do means they may not learn as much or as quickly as in the past and may not produce such good leaders in the future. Harman agrees that the crunch at the top end is a legacy of the 1980s, when CT Bowring Insurance Brokers (now part of Marsh) stopped attending graduate fairs and actively recruiting, at a time when other financial sectors were keen to attract top talent.
"There was a gap for up to a decade, and many of these people recruited then found their way around Lloyd's. So you have a five to ten year gap - and this is where we are missing the people at the top now." He suggested the way ahead for companies is to nurture from within, by taking on keen "hunters" and providing an interesting job. Retaining these individuals means making them part of an organisation in which they have a real vested interest.
Optimists believe that the talent shortage could be resolved within a few years, as talented young people come up through the ranks and companies invest time in training them. QBE's solution to the problem is to launch an innovative recruitment programme to attract more people into re/insurance as a career.
Carrie White has the task of developing the company's new staff in their European operations. She helped assemble and run a pilot of the Leadership Development Programme, a scheme to foster development and growth from within. In April, its success led to its launch as a nationwide recruitment drive to help attract talent from other sectors. The company hopes its approach will not only help to retain staff it has invested heavily in, but also to attract more future leaders to the company. "QBE is a good organisation for rewarding staff," said White. "We have a top quality rewards package which is pretty good compared to our competitors. What we want to do is make sure we not only get the right talent, but also use that talent in the right way."
QBE's nationwide programme offers ten posts in underwriting, claims and finance across its UK offices and lasts for 18 months. The scheme continues to assist candidates by giving them mentors for their continued progress within the company.
"With the launch of the programme, the company is taking responsibility for developing future leaders in the industry," said Sue Smith, head of human resources (UK). "QBE takes a different approach when doing business so it makes perfect sense for us to recruit and develop our employees in an innovative way too." Barbara Schonhofer, managing director of re/insurance recruitment specialists EJS Partners says QBE's programme exemplifies what companies should be doing to bring people up through the company and attract the best from other sectors. "There is a shortage in the talent pool with a lot of competition," said Schonhofer, who says she is constantly recruiting brokers, actuaries, modellers and IT people. "You need to grow your own talent and in the long run your organisation will benefit from training your own people and building them up."
She added there is a limited pool of people in risk management and good chief risk officers and underwriting directors are "few and far between". But the biggest shortfall is in cross-skilling, where an underwriter has management skills or a broker has a good knowledge of IT. "The people who are the movers and shakers, the dynamic ones who understand the broad business, they are the ones really in demand. If they have a clear vision of where they are going, people are attracted to that talent."
But the problem is nothing new. Worldwide, there has always been healthy competition to attract the brightest and best. And talented individuals often leave to set up their own companies, leaving a problem of succession. According to industry veterans, poaching has always been the first resort for plugging gaps and expanding business. "It has always happened - it is just more public now," said Harman. "Demographics tell us that the labour idea that everyone is equal is rubbish. The few lead the many, whether it is a tribe of pygmies, an American corporation - or Lloyd's."