Steve McGill is group president of Aon P.L.C. and chairman and CEO of the brokerage's global risk management business. Mr. McGill had a long career as a brokerage executive in the London market before joining Aon in 2005. At Aon, he has led several initiatives, including last year's controversial deal with Berkshire Hathaway Inc. to establish a facility that guaranteed capacity on certain business placed with Lloyd's of London syndicates. Recently, Mr. McGill spoke with Business Insurance Editor Gavin Souter about the outlook for Aon and the insurance market. Edited excerpts follow.
Q: What do you have planned for Aon over the next 12 months?
A: To be honest, it's more of the same. It's continuing to realize the full potential of the firm, maximizing the value we deliver to our clients across the world, and recognizing different clients have different needs ... continuing to drive our innovation agenda.
Certainly, over the last five years, we've been at the cutting edge ... whether it was building GRIP, which is now the largest proprietary database and risk information system in the world, developing the Berkshire Hathaway sidecar that we did in London last year, which created a degree of concern at the time, or, on the Aon Hewitt side, developing the first-ever corporate health exchange.
So I would say we're continuing to build the success of the platform.
Q: As you mentioned, the Berkshire Hathaway deal caused a stir. Do you think that has settled down, and do you see yourself doing similar things with other insurers?
A: It has settled down. We've worked hard to really communicate how the transaction would work and why actually we felt it was good for clients, good for the London market and good for Lloyd's. And we believe that it has actually achieved what we said it would achieve.
Bringing thoughtful additional AA-rated capital into the industry and aligning it with the sort of world-class leadership that exists in London actually helps reinforce the value proposition of the London and Lloyd's markets. And so we saw a trend where new business was going to London and certainly orders were being retained in London or increased. And so I think it's been a successful transaction from that standpoint.
The principals of portfolio underwriting and portfolio broking and the use of data and analytics to deliver differentiation to our clients is something that we're very excited about.
Q: Do you think the new capital entering the insurance market is here to stay?
A: There's a lot of debate about the permanency of the capital. Our view is it's probably going to be long term because, you know, you're certainly seeing a trend with pension funds wanting to diversify their investments. You only need to take a couple percentage points of diversification from the trillions of dollars of assets under management, and it's a big number. And the returns that they need to make are not as high as the returns that conventional underwriting capital would like to make — single-digit as opposed to double-digit.
So I think there are some structural changes that are happening that could have quite a profound impact on the capital in the reinsurance industry and possibly the insurance industry.
Q: Aon has grown a lot through acquisitions over the past 20 years. Have you grown to a point where it's not necessary to complete numerous acquisitions?
A: We've never stopped doing acquisitions. We're proud of our history with acquisitions. In the last four or five years, if you ignore the two really big transactions of Benfield and Hewitt, we've been spending a couple of hundred million dollars a year on bolt-on acquisitions to continue to strengthen our platform, and we have every intention of continuing to do that.