What do you do after you leave the job as CEO of the world's largest insurance brokerage firm? You become the CEO of a privately owned technology provider for the energy and environmental markets, of course.
That's what Brian Storms, former chairman and CEO of Marsh, is now doing after leaving the brokerage firm last fall in a very public falling-out with his boss, the now also-departed Michael Cherkasky, former chairman and CEO of MMC Corp., the parent company of the brokerage firm.
The changes at Marsh have been breathtaking, beginning with Storms' departure last fall and now bookended with the appointment of Brian Duperreault, the former chairman of ACE, to president and CEO of MMC Corp. Earlier, MMC brought on Daniel Glaser, a former AIG executive, to take over Storms' old job of CEO of the Marsh operations. And, during the past few months, a handful of other top executives, some new and some longtime employees, left the firm.
In the process, Marsh abandoned some of the key initiatives started under Storms' tenure and began a process to drastically reduce costs to increase profitability. Resources, Marsh executive management now says, are being directed toward client-facing functions.
"I didn't know how much stress I was under until after I left Marsh," explained Storms in an interview in midtown Manhattan. A large part of that stress he attributes to the "lack of clarity around balancing short-term results with building long-term, sustainable value as a part of my effort at a major transformation of Marsh."
Storms' abrupt departure from Marsh came despite prior public announcements by Cherkasky and Marsh management that the company was making long-term investments in technology, infrastructure, marketing, training and product development to position the company for future growth beginning in the second half of 2008. But clearly the board was unwilling to wait that long for revenue and profit growth, possibly because market pressures on all brokerage firms escalated as pricing continued to decline in the midst of the soft market. Ironically, when Storm's departure was announced, the markets reacted with a drop in the value of Marsh stock.
Last month, Storms was named CEO of APX Inc. based in Santa Clara, Calif. He now splits his time between offices in Jersey City, N.J., and Santa Clara. APX markets systems that create, track and transfer emission credits for the environmental, energy and "cap and trade" markets. The company is privately owned. While at Marsh, Storms instituted a number of environmental and climate-related initiatives.
Storms won't talk about his tenure at Marsh because he prefers to focus on the future and the opportunities at his new employer, APX, rather than the past, but he certainly has a point of view on where the insurance business and the brokerage business are headed.
With the ongoing soft market, the problems with commission and contingency-fee income, and the changing nature of risk, the insurance brokerage community--and insurance companies--needs to look at a new business model, he said. Storms anticipates that new competition in the insurance marketplace, especially for the largest, most sophisticated clients and risks, may well come from an unanticipated direction, perhaps from firms not now considered to be important players in the insurance space.
"The biggest risks that the very largest clients face today are not insurable," Storms said. Brokers and insurers need to help clients find solutions to those risks, he said, if the industry is to be successful in the future.
He pointed out that both brokers and insurers have failed to invest in the kind of technology needed to succeed in the market. "From the client's perspective, there are huge technology deficiencies and huge inefficiencies up and down the value chain," Storms explained. "And these new systems must be seamless and fully integrated, especially for the largest global clients."
Fundamentally, Storms believes that the winners in the insurance markets will be "those players that really understand market segmentation." He added that, in the brokerage markets, too many firms want to be all things to all markets and that the marketplace still remains fragmented. "There is a lack of real segmentation," he said. There remains increasing opportunity to develop products based on similarities of risks faced by clients in particular segments of the market.
Storms joined Marsh when Jeffrey Greenberg was CEO of MMC, a few months before former New York Attorney General Eliot Spitzer charged the insurance brokerage firm with manipulating the marketplace using contingent commissions. Storms came to Marsh from the financial services industry and UBS Global Asset Management. Before Storms was named CEO of Marsh, he headed up Mercer Human Resource Consulting, another MMC company.
April 15, 2008
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