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By DAN REYNOLDS, senior editor of Risk & Insurance®

There are times, from an underwriting perspective, when a company might want to blend into the woodwork. In the financial sector at least, this is definitely not one of those times.

With so much distrust directed at banks, insurance companies, hedge funds and the like, Bayeux said this is the time when a diligent financial sector risk manager wants to make sure his or her firm looks nothing like anybody else's in the sector, on paper or otherwise.

"A lot of what we do is differentiating and how do you differentiate yourself not only from others and your peers but others outside the industry."

"If an underwriter has got X number of millions or billions of dollars of capital that they can put up in limits then it's our job to make banks the company that the underwriter wants to invest its money in rather than somebody else," said Bayeux.

Bayeux, who spoke between bites of his turkey sandwich in his suite at the Hyatt Bonaventure in Weston, said he sees the broker's job less as finding ways for risk managers to spend money on insurance, as helping risk managers understand exactly what their risks are so that they can make the most efficient use of their capital. That also means bringing CFO's and anyone else the risk manager and broker deem necessary, to meetings with underwriters to provide the best face and the most complete information in the effort to tell the company's risk management story.

"I would be providing a means of differentiation, providing metrics and the math in determining what the differentiation should be and to help pose the client in the best way possible as you are evaluating the risk," Bayeux said.

"It's very powerful when you get the CFO or an investment officer talking face to face with underwriters."

Bayeux, an affable sort, is well-regarded within the industry and showed himself to be the perfect subject with whom to share a cup of coffee during breaks at the ABA meetings. He has more than 20 years experience in the financial sector as either a risk manager or a broker and said he remains optimistic about the ability of U.S. banks and financial institutions to bounce back from the massive equity losses that have struck the industry and the broader market these past 18 months.

But to do that, Bayeux said banks need to "stick to their knitting," making the kind of rational mortgage and commercial loans they used to make and stay away from what he called "the crazy stuff."

"I would like to think that recent history will be something that is so profound that to not remember it for the next 100 years would be something that would be almost impossible," Bayeux said.

Tightening the regulatory quilt will certainly be a part of that knitting. But Bayeux was fairly outspoken about what he perceived as the federal government's role in creating social engineering programs that resulted in the financial sector making mortgage loans to millions of people that they shouldn't have.

"There has been some argument that a lot of the loans that got us into where we are now were loans that maybe the bank wouldn't have taken but for some insistence by this act or that. So, I hope that everyone, not just the bankers but government and regulators and the investing community, I am optimistic that there is a lesson to be learned and I hope they do get it," Bayeux said.

By the end of March, there was some indication that the financial sector, aided by billions in aid from the federal government, was turning the corner.Stock prices for such firms as Wells Fargo (+41.42 percent for the month), Bank of America (+99.45 percent for the month) and CitiGroup (+128.33 percent for the month) were in a far better position at the end of March than they were at the beginning of it.

But Bayeux said brokers in the financial sector still have a lot more to do these days to earn their keep.

"What happens maybe is that the megapremiums are going down and so you have to work a little bit harder to replace a hundred thousand dollar or a million dollar premium with a couple of banks that maybe at a billion dollars aren't paying that same kind of level," Bayeux said.

"My take as a broker and it has been that way since I've been a broker almost 20 years is that you sit down with your client, you listen to what they have to say and then you develop a solution together," Bayeux said.

"That is not dead and that is something that is vibrant today, and the brokers going forward that are going to succeed are going to be the ones that are less product driven and more solution driven. That could be solutions to current risks but it is also helping the bank do a piece of business they couldn't have done before."

That also means bringing one's experience to bear and being innovative if you want to keep the business you have, increase risk-reward certainty for your client and, hopefully, gain the trust of yet other risk managers.

"Our way in the door is not necessarily to get rid of the other broker," Bayeux said.

May 1, 2009

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