Integro launched with $300mn of private equity support
Bob Clements has thrown down the gauntlet to broking giants Marsh and Aon after his latest insurance start-up Integro Ltd was launched last week with just over $300mn of capital in a private placement.
The veteran insurance executive has joined with his former Marsh colleagues Peter Garvey and Roger Egan to head the New York headquartered firm which will position itself as a fresh alternative to the broking giants who are addressing allegations of impropriety and conflicts of interest while tackling heavy cost bases in a sluggish pricing environment.
Bob Clements – the former president of MMC and founder of MMC Capital Inc – will chair Integro Ltd, with Peter Garvey, the former Marsh president, as president and Roger Egan as chief executive.
Also joining the company - whose name in Latin means to renew or make better - will be Walter Tomenson, until recently the director of Global Client Development at Marsh, together with ex-Aon Executive vice-president Don Davidson who is expected to head client development at Integro’s Chicago office.
Integro plans to have seven North American offices established within a few months including New York, San Francisco and Chicago, together with overseas offices in London, Zurich and Bermuda. It also expects to be licenced in all 50 states.
The company believes it can compete for the commercial US risks market – a sector currently dominated by the big two, together with Willis. According to Clements – who has launched a number of start-up insurers such as ACE, XL, and Mid Ocean in response to distressed market conditions – the time is right for an alternative. “Over the last 8 years large users of insurance watched helplessly as their competitive choice for brokers narrowed from seven serious contenders to less than three. We don’t think that’s a healthy condition, and furthermore, we don’t think this is a zero sum game,” he claimed.
In the past few months, Marsh, Aon and Willis have all agreed multi-million dollar settlements with US regulators including the campaigning New York attorney general Eliot Spitzer.
In the investment literature provided to prospective investors, Integro says a “unique opportunity to create a new and perhaps the next industry-leading insurance brokerage firm has arisen from the recent series of highly publicised regulatory investigations into the insurance brokerage industry and their negative aftermath. The image of the industry has been damaged and client trust has been eroded”.
It continues: “The adverse impact of these events so far appears to be severe: (1) regulator-enforced changes to Marsh and Aon’s business model and practices, (2) large monetary payments and settlements, (3) potentially years of civil litigation, (4) negative press and (5) a demoralised industry workforce”
Integro’s fund raising was led by Bob Clement’s son, John Clements, and included investments from firms such as GE, Century Capital Management LLC and CSFB. Another well-recognised investor is Jack Byrne, the founder of Montpelier Re and former chief executive of White Mountains Insurance Group. In all five former presidents of Marsh have invested, together with friends and family of the management.
Clements and his family have committed $5mn to the Cayman Islands domiciled venture through an investment partnership and a company Tara Partners Ltd. Insider Week understands more than 20 percent of the company’s equity has been reserved for management and employees, and no single shareholder has more than a 15 percent holding.
In its 6 May statement, the company says its launch “introduces a fresh business model for the insurance brokerage industry, which has been plagued recently by numerous regulatory investigations”. It continues: “Integro will focus exclusively on the business of assessing risk and securing competitive insurance programmes for commercial and institutional enterprises that have large and/or complex risks with specialised insurance needs.”
In an interview with our sister publication The Insurance Insider to be published on 12 May, Clements reveals that Integro expects primarily to gain traction organically rather than through acquisition.
“There is no efficient way to grow through acquisition because the market in North America is principally served by only three brokers,” he explained, before adding that the firm would look to make selective acquisitions if this would help build the right infrastructure.
Clements said the company would not be curtailed by lack of ambition: “We are starting in fourth place, but we don’t see any reason why being first one day isn’t a possibility,” he told The Insurance Insider.
“Buyers want more choice, the underwriters – who are the industry’s capital markets – want greater distribution and the professional brokers say they want more choice,” he added.
Clements stepped down as the chairman of Arch Capital Group Ltd in March while Peter Garvey – who was only promoted to the role of co-president of Marsh in November 2004 – also resigned recently. Roger Egan – a former president of Marsh Inc - left the firm last year as the broking giant restructured its management and reporting structures in the wake of Spitzer’s charges.