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Q&A: Grahame Chilton, Arthur J. Gallagher

Q&A: Grahame Chilton, Arthur J. Gallagher

Grahame Chilton was named CEO of Arthur J. Gallagher's international operations in February, a role that will take effect after all regulatory approvals are in place. His career spans more than 30 years. In 2013 he founded specialist reinsurance broker Capsicum Re, a joint-venture with Gallagher. He previously was chairman of Aon Benfield Group Ltd., having overseen the sale of Benfield Group Ltd., the reinsurance brokerage of which he was CEO, to Aon P.L.C. He sat down with Business Insurance Senior Editor Sarah Veysey to discuss his new role and the challenges brokers face. Edited excerpts follow.

Q: What are your ambitions for Arthur J. Gallagher's international operations?

A: My ambitions for the future of Arthur J. Gallagher's international operations is that I want us to be an integrated, major player in every territory and every class that we want to be in — we only want to be somewhere if we are a top player.

I want the business to be dynamic, integrated and “the business to watch.”

In the short term, I want to give stability and leadership and empower people to run the business, and to make sure team members have the same excitement for the business that I do. I want there to be a buzz about the business, so that people enjoy working here and customers and clients enjoy doing business (with us).

Q: How will your previous experi-ence help you in your new role?

A: (We) took Benfield from being a single office to a business with 40 offices — and that did include both organic growth and acquisition. There have been acquisitions here, and there will continue to be a need to integrate those. We've already set up a new M&A team here and appointed Oliver Homer (previously group head of M&A at Cooper Gay Swett & Crawford) to lead that. I think I can plan well. I feel excited. I can bring stability and strong leadership to integrate the business.

Q: Why did you set up Capsicum Re?

A: I am a strong believer that this is a relationship business, and I felt that the reinsurance broking industry had started to forget that. I felt that there was an opportunity with the right partner — and Arthur J. Gallagher was the right partner — to build out a good reinsurance franchise. This is our first full year of trading, and we will place about $1 billion of business into the market.

Q: What are the biggest challenges facing insurance and reinsurance brokers currently, and how can they meet those challenges?

A: Undoubtedly, the biggest challenge is the amount of (insurance-linked securities) capital and capital providers seeing this as an asset class — then they can provide capital which takes on risk. We are fast seeing two distinct parts (of the market): capital that will take risk for a price that will become more transparent, and distribution-broking services and also MGA and MGU business. The challenge is to decide whether you are capital or you are distribution.

Distribution is the business that Arthur J. Gallagher and Capsicum are in. And then the challenge is how you play in the customer to the capital.

For reinsurance brokers, the challenge is those sources of capital but also consolidation — there is less reinsurance being bought so there will be less reinsurance brokerage.

Q: What does the current wave of M&A in the industry mean for buyers and brokers?

A: (M&A among brokerages) is a particular opportunity for Arthur J. Gallagher because you have disaffection within (many) brokerages because companies are being put together that were never meant to be together and there will be brokers and clients that are disaffected by that. And they will seek solace elsewhere. There are opportunities to recruit people to come and work here — it is a nice place to work.

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