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By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®

CHICAGO --- Rumors swirled and clung like seaweed in the Atlantic surf on one of those days when a storm is kicking offshore and the water is brown and itchy. When Patrick G. Ryan announced he was launching Ryan Specialty Group in 2010, people in the insurance brokering industry wondered whether he was aiming to compete with Aon, even punish his former company, perhaps for not accepting him back within its ranks when he decided to return to the brokerage business.

Ryan made the point very plain in our profile of him, featured in our February print issue. He has no interest in hurting the company he created or all of the friends that remain there.

Besides, as of the 2010 annual stockholders' meeting, he held 6.4 percent of Aon's common shares, making him the firm's top private investor. The Aon website also still houses an extensive biography of him as the executive chairman.

All that said, we didn't go over, point by point in our profile, Ryan's argument for why he isn't competing. Here we will:

For starters, Aon has positioned itself as a top reinsurance broker in the past couple years with the purchase of Benfield. Ryan Specialty Group does not house a reinsurance intermediary arm and, according to Ryan, never will.

"I don't want to compete with Aon, Marsh, Willis on the reinsurance side or any other RSG clients," he said.

And most directly, RSG does not do retail, either.

"Most people like to hear me say this, and some don't: I make a big deal of the independence," he said. "Why is that important? It's important because the client of the wholesaler is obviously the broker, so the retail broker has said, 'I don't want to deal with a wholesaler that's owned by a retailer.' So it limits your people and it limits the company."

This explains why the big brokers, back after former New York Attorney General Eliot Spitzer brought the pain in 2005, sold off their major wholesale operations (in Aon's case, Swett & Crawford).

Instead, when it comes to its wholesale insurance brokerage operation, Ryan Turner Specialty, its natural competitors are the other big wholesale brokerages. Ryan named the top of the list when asked: AmWins, Swett and CRC.

The other main components of Ryan Specialty Group are its managing general agents and managing general underwriters. Here, Aon still has subsidiaries involved, such as Aon Underwriting Managers (AUM) and the Agency Specialty Product Network Insurance Services Inc. Ryan estimated that Aon used to have 35 MGUs but now has just four to five, and suggested that ASPN has pretty much died down.

"We're not saying that they're out of the MGU business," he said about Aon. "What we're saying is that, the ones that they're in, in those products, we will not compete ... and we had a chance to."

He pointed to the instance in which an MGU that specialized in sports and leisure wanted to talk to RSG. Ryan Specialty Group declined because that MGU competes with Fort Wayne, Ind.-based K&K Insurance Group, an MGU subsidiary of Aon and member of ASPN.

"If you're going to have a relationship with somebody that's going to broad, deep and trusting, you should respect that issue," he said.

In Ryan's mind, the main competitors for his MGA/MGU businesses are carriers that offer similar lines.

As for another issue raised previously that Ryan has poached top talent from Aon, Ryan has made it clear that all former Aon employees were not longer with Aon when RSG was formed. We're talking about the likes of Debra McClenahan, former CEO of Aon Underwriting Managers, Jerry Tegan, former chairman of Aon Specialty Product Network, Kevin Schrage, former head of Aon's small business brokerage operations, Frank Phillips, former president and CEO of Aon's U.S. brokerage operations for personal lines and small commercial businesses, and Diane Aigotti, former senior vice president and chief risk officer for Aon.

Ryan also believes that brokers are entitled to work where they want to work, as he pointed out in our interview with him and as we discussed in our profile of him.

Can you blame former Aon employees for wanting to work with Ryan again?

February 17, 2011

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