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In May, following the Spitzer investigation of insurance broker Marsh Inc. and the subsequent settlement with the firm, three former top Marsh executives announced that they had raised $300 million to start a new brokerage firm that would go head-to-head with the three major players. Integro, founded by Bob Clements, Roger Egan and Peter Garvey, would target only the very largest and most complex risks. Its market would be, by and large, the largest companies in the world.

Just weeks after the new company was announced, Risk & Insurance® editor-in-chief Jack Roberts sat with Integro CEO Roger Egan and Peter Garvey, the new company's president, in their temporary New York City offices. Egan was president and COO at Marsh, and Garvey was co-president of Marsh's risk and insurance services subsidiary. In an accompanying article on page 19, Roberts separately interviewed Clements, who spent 30 years at Marsh before leaving to help create some of the largest insurance companies in the commercial insurance business.

What are the key issues you face to be successful?

Roger Egan: The first issue you face is that you have to hire key people; you have to hire talented brokers. If we have a group of really talented insurance brokers, we'll be able to attract clients. We focus on the large complex risk segment of the marketplace, and you have to have the expertise to serve those clients.

How will Integro differ from the other three brokers in this market?

Peter Garvey: I think that because we're new and we're building this brick by brick, person by person, we have an advantage over all the others in that we can build a very strong culture right from the beginning. We can define it and get our message out among all our colleagues about what kind of firm we want to be. All these companies are terrific companies and they have great resources and terrific people, and we admire all three of them. But, they are all three roll-ups. Some took 100 years to roll up. They are made up of other businesses that they put together.

Roger Egan: We have a fresh business model--not necessarily to be confused with a new business model--but it's fresh. We don't have legacy issues. Legacy issues could be good or bad. We don't have the backing of a big client base and an existing revenue stream and a large infrastructure. There are things we have to build from scratch.

But, nor do we have legacy systems and capitalized expenditures that you're not necessarily continuing to draw value from. We don't have the negative effects of incompatible cultures that you have to deal with in a roll-up. We don't have errors and omissions problems from decades ago. We don't have any of the other issues that are facing any other business that has been around for a while.

Peter Garvey: We do have this unique opportunity. The other three are all very big companies that are in multiple businesses--brokerage, underwriting management and the wholesale business, even insurance. They are in all the different client segments.

We have the advantage of being able to focus. We focus on the large client segment that has complex risks. We're going to be attracting brokers that really love that business. The cultural difference there is that we want to attract brokers who love being brokers, who love the insurance business, who love large complex risks and who love interfacing with risk managers.

Let's talk about that market a bit more. What are the dynamics of the business today?

Peter Garvey: What is going on, I think, is the challenge to the institutional relationship between the client and the broker. What had been going on was an attempt to diminish the value of the individual's relationship and transfer that to an institution. Maybe the near-term impact of the regulatory scrutiny is to diminish the strength of the institutional relationship, and then by default, increase the importance of the individual relationship.

Board-level interest in the institution's broker relationships has never been greater than it is now. It can create the event for a company to look at other brokers. It also creates more interest in clients having multiple-broker relationships. It's a phenomenon that has been gaining momentum prior to the current regulatory issues. Since then, that interest has heightened even more. In any given situation, there are more than three choices, but right now there are only three consistent broker choices in the market segment we are going after. We seek to be the fourth consistent choice.

Your market is large and complex. What will be your initial focus within that market?

Roger Egan: Specialization comes in two forms. We will specialize by type of risk so we will have world-class brokers that specialize in D&O, excess casualty and so forth. We will also have industry specialization.

Peter Garvey: We will focus on industries that have unique risk profiles. The obvious ones are health care, financial services, energy, pharmaceuticals and transportation. These are among the ones we will be looking to further develop over time. The larger the market, the sooner we'll get to it.

Roger Egan: Not all industries have the same risk profile. Our bet will be to target as the first groups, industries that have the very highest risk profiles. Pharmaceuticals is a great example, medical malpractice is one area?and professional service firms.

What should we expect from Integro in the coming weeks and months?

Roger Egan: We plan to have about 500 employees in the first year. We're hiring the key leadership team now. There are around 20 to 30 key leadership jobs. Our first order of business is to fill these key leadership positions.

Peter Garvey: If you think of a start-up, we have to focus on four tasks. We had to raise the money. We have to attract the professionals. We have to get the regulatory approvals, and then we have to attract clients. We've raised the money, and we're in the process of doing all of the other things.

What kind of culture are you trying to create at Integro?

Peter Garvey: Because of the regulatory scrutiny of the last six months, all brokers will strive to be more open and transparent about compensation but also about the risk transfer process. Our competitors are hierarchical companies. We're building more of a partnership culture where we lean on each other in the environment that's created within the company. The desire for all of us who make up the firm to understand what is going on is much greater in this kind of an environment.

In the current marketplace, I've heard comments from risk managers and brokers alike about how broker service levels seem to be declining among the big three. Is that an issue for Integro?

Peter Garvey: That relates to the question of our start-up process. We obviously want to make sure that we have the complete wherewithal to deliver on service commitments. That's probably the best way to address that issue now. We don't need to adjust to the realities that now face existing businesses. We're building a business. We'll only take on the business that we're fully prepared to handle. We don't have to be all things to all people.

When large clients engage us, they're probably not going to engage us from day one to handle, across-the-board, all of their business. We don't expect that, and we're not even interested in that. We're counting on the fact that most of these clients have more than one broker. We're engaged in D&O or excess casualty or excess property. We're going to have a strong team assembled to handle that particular business. It's going to be a properly constructed team with senior expertise.

Roger Egan: We're mindful that there is a perception by clients of service problems. Clients believe that service is diminishing. We're going to build our service capability, a strong service capability, and a great system support for it. We can do this because we don't have to adapt legacy systems. We can jump in with a totally Web-based system, totally client-friendly system.

Peter Garvey: There are a lot of off-the-shelf systems that we can use with limited customization. There has been such a quantum leap in technology that jumping in at this point is almost an advantage. There's a cost advantage, and you can get exactly what you want customized by just modifying an off-the-shelf system.

Will you charge contingent commissions?

Peter Garvey: We are not going to have contingent commissions or PSAs. All of our compensation will be transparent?100 percent to our clients. And because we are focused on large complex risks, the majority of our revenue will probably be fees. They may be fees taken by commission, which is pretty common. But it will be 100 percent negotiated in advance and totally transparent.

Roger Egan: In my experience, clients don't mind paying brokers for the services that they are provided. You have to agree on the value of those services, and that can sometimes be an issue. But it's best to have a candid dialogue with clients about that.

Roger, you were the president of Marsh. Why didn't you know about the problems before the Spitzer investigation?

Roger Egan: The fact is, I didn't know about it. A lot of people didn't know about it. About four levels below me, they didn't know about it either. There were 43,000 people that reported to me. So far, the wrongdoing has been isolated to a small group in New York?the global brokering unit?and I think only three people have pled guilty.

What was happening in that group in regard to bid-rigging and price-fixing was not known by the organization. That unit was reviewed, at least on an annual basis, by the professional standards group. They didn't know about it. It was reviewed by the internal audit group who didn't know about it and by the outside auditors as well. None of those auditors found anything. It was basically not known within the organization.

I didn't resign from Marsh until April 8 of 2005. I didn't have to resign. As far as they're concerned, I could still be there. I was asked to step down, and I stepped down as (president of Marsh). I resigned on April 8 to do this (join Integro). There was never any culpability ascribed to me. First I stepped down, and then I ended up resigning voluntarily to come here.

What are your plans in the long term?

Roger Egan: We seek to be the first choice of clients, the leading choice in our market segment. Size is not an appropriate measure, especially compared with the other major firms. We don't plan (to offer) all the different kinds of services that they offer. If you take the other three, strip them down to what we intend to do, you can see that we can quickly get a critical mass that can compete in our area.

We seek to be the best, not necessarily the largest. It will take us time to grow. We seek to be global. We're starting in the United States and in Bermuda. Then we can go to the Continent, probably have international offices in Europe and the Far East.

JACK ROBERTS, a former reporter, editor and publisher, is editor-in-chief of Risk & Insurance®.

August 1, 2005

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