In 2008, when Rod Fox and Jim Stanard launched Tiger Risk Partners LLC, naysayers told them they would have difficulty getting a reinsurance brokerage off the ground, much less make a profitable go of it.
Skeptics left behind their business cards just in case Fox and Stanard came to their senses and decided to sell. Four years later, Fox, the CEO, and Stanard, the chairman, and their firm are still standing.
"One of the CEOs of one of the biggest brokers said when we started Tiger Risk that there was no way we would be able to survive," Fox said, in an interview with Risk & Insurance® earlier this year. "Then, when he saw that we had in fact survived, he said the big brokers would kill Tiger Risk on the analytics. And now, look where we are today. So, there's a place for someone like us. We earn our supper every day."
While the privately held Greenwich, Conn.-headquartered company doesn't break out revenue and profit, the company said it places property-catastrophe and casualty reinsurance for 30 to 40 clients, employs more than 60 people, and maintains offices in Atlanta, Chicago, Minneapolis, London, Raleigh, N.C. and Stamford, Conn.
When Tiger Risk roared onto the scene, in the fall of 2008, the market had just been rocked by the $1.75 billion purchase of Benfield Group by Aon Corp. in August 2008. The Aon-Benfield, merger, itself preceded by Aon's purchase of the U.S. and U.K. reinsurance brokerage subsidiaries of Gallagher Re, was about to be followed by Guy Carpenter & Co. LLC's purchase of John B. Collins Associates Inc. in March 2009.
The mergers, Fox said, provided an opening for executives with the foresight, the experience, the connections, and the capital to get into reinsurance brokering and gain a foothold in a reinsurance universe dominated by three giants: Aon Benfield, Guy Carpenter & Co. LLC and Willis Re.
"Who really benefits from this kind of market domination?" Fox asked, in an article he authored last year.
Like many other industry critics, Fox said the model used by reinsurance brokerage companies is rife with conflicts of interest in which the same broker owns the retail and wholesale relationship in the "front door," and the reinsurance relationship "in the back door."
In 2010, the top three global reinsurance brokers grossed revenues of $3.08 billion combined, according to industry statistics. The fourth through tenth largest global reinsurance brokers grossed $722.13 million combined.
"Essentially, we started Tiger Risk because we felt that many companies weren't getting the value from their reinsurance advisers," Fox said. "We felt there were lots of services being provided by big reinsurance brokers, but that they didn't add much value."
An ardent proponent of slashing reinsurance transaction costs through the use of technology, Tiger Risk has succeeded mainly because it has remained focused on a small number of big clients, Fox also said. The company has stayed true to its strategy of placing property/casualty reinsurance more efficiently than the competition.
"Rather than being all things to all people, we focus on a very limited group of customers where we can provide an exceptional reinsurance buying experience," said Fox, who ran Benfield's U.S. reinsurance division in 2005 before leaping to Clarendon Insurance a year later, and after that to Clarendon spinoff Praetorian Financial. Stanard is also chairman and CEO of Renaissance Re.
So far, Fox and Stanard appear to have been proven right ? that demand in the market existed for a reinsurance broker built on the Tiger Risk model.
Reinsurance consultant Andrew Barile said both men deserve credit for starting a U.S.-based reinsurance brokerage operation from scratch, and for doing so in a contracting environment where the number of reinsurance brokers is shrinking, and where the volume of reinsurance premium has remained essentially flat.
CYRIL TUOHY, managing editor of Risk & Insurance®
August 22, 2012
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