Best practice makes perfect-Joe Clabby

Adrian Ladbury: What is your plan for ACE Europe and what can you bring to the group from your experience in the US? Joe Clabby: The ACE Group recently celebrated its 25th anniversary since the company’s inception in Bermuda in 1985. The growth of the organisation this past quarter century has been phenomenal and we now have offices in 53 countries across the globe. ACE Europe is at the heart of the ACE Group and has seen significant expansion itself in recent years as we now have a presence in the emerging markets of Russia, Central and Eastern Europe and Turkey. As a global company, it is vital that we cross-pollinate best practices across the group and this includes moving our people around the network and learning about how we operate in very different markets. Understanding how local markets operate requires actual on the ground experience and this explains why I have relocated from ACE USA to ACE Europe and to a certain extent why my predecessor, David Furby, has moved from Paris to New York. My first six months have been fascinating and I have certainly learned a great deal particularly from my ACE European colleagues and in turn I have begun to share some of my experiences and contacts from the US with my continental Europe management team.hideAL: Where is the group positioned worldwide and more specifically in Europe for corporate business in your view? JC: In market capitalisation terms we are one of the largest insurers in the world. From 1995 when we acquired Cigna to today we have really grown significantly from a top 25 company to a more credible company in terms of balance sheet size, capital and essentially in every meaningful measure. We are now an established global insurance leader. We are one of the top two or three international property and casualty specialty insurance companies and have the infrastructure to deliver specialty services around the globe. We have an on the ground operating presence with local relationships in all of the world’s principal markets and transact business in over 140 countries. AL: What do large corporate insurance buyers want from you and how are you delivering what they want? JC: We have made a significant investment in communicating with our core customers. We are now engaging more with our customers to better understand their needs and priorities so that we in turn can work with them as strategic partners and invest accordingly. We are a service-based, not price-based company, particularly in the multinational arena so we need to ensure that our investment is aimed at the right services, where it adds real value for our customers. Some of our competitors are comfortable with the price-based model but this is not consistent with ACE’s underwriting ethos or our objective to be a top tier service provider. ACE’s strategy is to focus on specialty and service areas where we can provide real added value to the insured. At the end of the day our commitment to underwriting discipline is also beneficial to the client as ultimately the balance sheet is essential to client security. Any action on our part which destroys capital and undermines balance sheet strength would ultimately damage client confidence in ACE and our ability to pay claims. We like to say that underwriting discipline is a part of the ACE DNA which we believe contributed to the recent decision by Standard & Poor’s to upgrade ACE to AA-, a rare move in the current market. Customers are also asking us to raise our game and not just in global programmes. For example, many risk managers whether based in Paris, Madrid or Rotterdam are looking for a service-based approach with local coverages, irrespective of geographical location and they require a local contract that deals with issues on a local basis. They want multiple parts of the contract that relate to wherever they touch ACE and that we recognise the relationship in a global way. So our ACE network has to be strong and the process and approach the same whether in the US, Europe or Brazil. Some insurers may have significant presence in certain geographies but do not really understand the local commercial insurance issues. That can be a problem for customers. There are also a lot of complex tax, compliance and regulatory issues and the insurer really needs to understand what is going on locally. It all comes back to having a focused local presence which makes all the difference for the customer. AL: ACE is a big company but how can you compete in the international market with companies like Chartis or Zurich that have more offices on the ground? JC: It is about being the best of the three and committed to delivering our products and services quicker and better. Three years ago we built a common service platform, ensuring global consistency in all territories whether it’s for D&O, property, casualty or other lines we offer. ACE’s strategy is not focused on market share, on being the biggest, rather it is about being the best. Our service teams make sure that money is moving in and out of countries when it should be, getting back to captives, issuing policies and terms and conditions, making sure the local policies have the correct wordings, tax requirements are met and legal issues are dealt with. Claims capabilities are absolutely critical in this business. You have to listen very carefully to brokers and clients and ensure that our claims teams are closely aligned from the outset. We recognise we need to be nimble and fleet of foot so that we can affect change quicker than the competition. I am confident over time that this investment in people, systems and an efficient process will elevate ACE above our competitors. AL: But all this investment surely puts a strain on your combined ratio. How do you justify the cost and manage it? JC: It is about being more efficient, looking at the existing organisation and if necessary realigning and then delivering. Again, it is all about understanding what the client wants and then understanding how best to fine tune and adjust the organisation to deliver. In Europe we are in the middle of a process to do just that—redefining roles, operating processes and servicing teams. It helps if you separate out the business in terms of customer segments for large corporate and mid-sized clients. It is important to be particularly efficient when dealing with the SME market. We look to deliver what brokers and customers want at a cost that is acceptable to ACE. Additionally, there are best practices initiated in the US about four to five years ago and my goal is to replicate the best elements of those here in Europe without losing the advantages of the local ways of conducting business. We look to blend the best of ACE’s global and local capabilities. The key to this, of course, is to first understand how the marketplace works locally and let our local country management manage locally. To this we incorporate the common denominators of conducting business that have proven to be effective over time throughout the ACE network wherever the location. The client benefits, the broker benefits and ACE benefits. AL: How do you communicate with your customers and ensure that you deliver what they really want and not force-feed them what you want and are currently able to give them? JC: Customer communication is important and this is about transparency and getting closer to the client with the broker in a tripartite relationship. We have taken this to a new level with much greater discipline and mid cycle stewardship whereby we hold meetings with clients raising questions about where we are well in advance of the renewal process. This is about listening first and foremost and not selling per se. We look to find out what is on the clients’ mind. We did this in the US across ACE’s nine regions with the end result being nine regional Client Advisory Boards, resulting in an active and ongoing dialogue with over 100 of our largest clients. This enabled us to listen and better understand what the key issues facing our clients are. So we will look to emulate this across Europe and in particular in our key markets. AL: What about the brokers. How do you work with them? JC: Some markets are more SME and broker- dominated than others. We take a very focused approach here as we recognise we can’t be all things to all brokers. So we will spend a lot of time endeavouring to understand who the brokers are in each of our geographies and, importantly, which are the best fit for ACE. We look to identify which brokers match up well with us and make the most sense for ACE to transact with. Often this is a blend of both the larger and regional brokers. This is the group of brokers that we invite to participate on our producer advisory boards—again so we can better understand how we can best partner together. AL: What do you see as the key external challenges that confront you currently? JC: As a global and highly diversified company, Solvency II and the accounting standards project are both high on our agenda. These are, of course, industry issues that all companies are currently evaluating and dealing with. For highly diversified and financially strong companies like ACE it should prove to be a benefit in some respects as it will separate the strong from the not so strong which will also be beneficial for customers and brokers in particular. AL: How do you see the market developing and what is your core underwriting strategy in Europe currently? JC: We focus first and foremost on the business that we know and understand. In other words, our primary concern is maintaining our renewals and growing these relationships in other lines of business over time. We are not interested in top line growth for the sake of growth. That said, there are opportunities to profitably grow even in a market environment like this one. So there are some product lines and segments that we have identified where we plan to expand our presence. Likewise, there may be other areas where we have been happy to grow in the past but are not as interested at the present given the present pricing environment. For ACE it is about maintaining underwriting discipline, growing profitably in select lines of business while ensuring we have the highest quality people on board to help us achieve these goals.

Best practice makes perfect-Joe Clabby

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