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NEW YORK-Renowned insurance company builder Robert Clements' latest venture-New York-based insurance brokerage Integro Ltd.-is getting off the ground after securing more than $300 million in a private securities placement late last week.
The brokerage, which will be run by Mr. Clements and former Marsh Inc. executives Roger E. Egan and Peter F. Garvey, is targeting large accounts with complex risks and specialized insurance needs on a global basis.
That market segment, Integro's executives say, is being served only by the world's three largest insurance brokerages currently-all of which have been burdened by numerous investigations into their business practices, class action lawsuits and hefty settlements with state attorneys general.
Since late January, Marsh & McLennan Cos. Inc., Aon Corp. and Willis Group Holdings Ltd. have agreed to pay more than $1 billion back to policyholders in combined restitution and to change their business practices to settle allegations that they steered business to favored insurers to maximize their contingent commissions.
Marsh, in particular, has seen several high profile dismissals and resignations, including Mr. Egan's, as a result of the investigations.
The disruptions among other brokers could favor Integro, executives said.
"We're not entering a field where there is no room for another competitor," said Mr. Clements, who is chairman of Integro. "We wouldn't be doing this if we hadn't been encouraged...by large users of insurance who would like more choice, by underwriters who would like a more diverse distribution system...and by brokers themselves who...would also like additional choice about where to practice. We believe we offer a very attractive opportunity for all three constituencies," he said.
The launch of Integro also introduces "a fresh business model" for the insurance brokerage industry, which has been plagued recently by numerous regulatory investigations, according to a company statement.
That business model includes the guiding business principles of "clients first, transparent business practices and dedicated, quality brokerage services" and the belief that brokerages work best when they are free-standing businesses and not part of larger holding companies.
"We don't think that being part of a large combined company that has multiple, sometimes unrelated businesses, and management that doesn't have any experience being an insurance broker is the best position to address clients' interests when they're looking for a professional insurance broker," said Mr. Garvey, who is president of Integro.
At the same time, Integro is a well-capitalized startup that is free from traditional industry processes and technology, the executives say.
"We're not only unencumbered by substantial fines and penalties and restitution funds and reputational damage, we're also unencumbered by expensive legacy operating systems and unencumbered by unrelated business lines that distract management's attention and deplete capital," Mr. Garvey said.
While Integro may be unburdened by the fallout associated with the broad investigation into the insurance brokerage industry that began last year with New York Attorney General Eliot Spitzer, the three executives running the new brokerage have all at one time had a hand in running Marsh Inc., where the alleged fraud and bid-rigging activities charged in Mr. Spitzer's October civil suit against MMC occurred.
"While we've had careers at Marsh...we were not involved in or implicated in any way in any of the wrongdoing that happened at Marsh," said CEO Mr. Egan. "So it's not an issue personally for us, and our company...does not have some of the pressures of restitution funds and years of civil litigation" that the other large brokerages are dealing with, he said.
Mr. Egan, former president and chief operating officer of Marsh Inc., was asked to resign from his position in the wake of the investigations and litigation. According to an MMC statement at the time, the decision was not based on any suggestion of culpability but because Mr. Egan was accountable for areas of Marsh's business that were being investigated.
Mr. Garvey, former co-president of Marsh, who replaced Mr. Egan, resigned from the brokerage in March.
Mr. Clements, former president of MMC and chairman of Marsh Inc., most recently stepped down as chairman of Arch Capital Group Ltd., the Bermuda-based insurer he created. He also had a hand in building such Bermuda-based powerhouses as ACE Ltd., XL Capital Ltd., and Mid-Ocean Reinsurance Ltd.
With more than $300 million in capital now in place, Integro's executives say they are ready to proceed with plans for a "rapid assembly" of talent.
"We're not going to be a roll-up firm like some other brokers in the market today," Mr. Garvey said of Integro's growth strategy.
While Integro may make some small acquisitions from time to time, "the intended use of our capital is to be able to put in place a rapid assembly of talented brokers."
Among Integro's recent hires is Joe Salerno, Marsh's former chief financial officer, who is Integro's CFO. Walter S. Tomenson, former chairman of global client development at Marsh in New York, is now a senior partner with Integro, and Don Davidson, a former executive vp with Aon in Chicago, is now a managing director with the new brokerage.
With offices already in New York and San Francisco, Integro plans to open offices in Toronto, London and Bermuda and other major U.S. cities, including Chicago, Los Angeles and Atlanta, shortly. After that, the company will focus on opening offices in major cities in Europe.
At least one market observer last week said he thinks the market will be receptive to Integro.
"I think the market's always receptive to a new player. This is not an industry where there isn't room for more competition," said Ken Crerar, president of the Council of Insurance Agents & Brokers in Washington.
"I think what's happened in the market over the last six months has caused a lot of people to re-evaluate what they are doing both within the brokerage business as well as on the client side," he said.