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Charman: A serial entrepreneur and ‘underwriter’s underwriter’

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The announcement of John Charman’s retirement from his position as executive chairman of Sompo International marks the end of a varied and distinguished career in the international insurance market.

Charman will also stand down as CEO of overseas insurance and reinsurance at Sompo Holdings in September, fully retiring at the end of March next year.

The Axis founder led the international business of the Japanese carrier since it bought Endurance – the Bermudian business he led – for $6.3bn in 2017.

The serial executive never stood still, founding and running businesses, and steering companies to bumper M&A deals that delivered for shareholders and helped him become one of the wealthiest entrepreneurs working in the sector.

Serial CEO

First there was Tarquin, the parent company of Charman Underwriting, where Charman pioneered the marine war market at the height of the Gulf War in the early 1990s in conjunction with a young Richard Brindle, raking in millions of dollars of premiums as the conflict raged with its round-the-clock underwriting service.

The successful growth of the business led to its eventual sale to Ace in 1998 for £330mn, or 3x book value, as Charman notched up the first in a succession of multi-million windfalls.

And then Bermudian Axis launched in the wake of 9/11 with support from what is now Stone Point.

After a bitter departure, Charman was parachuted in as CEO of Endurance, and he led the business to a massive $6.3bn valuation when Sompo came calling – a stellar price tag for investors given where it was trading when he took the top job in 2013.

Former colleagues described an exceptionally driven man, an “underwriter’s underwriter” with an instinct to pick the right risk, and a track record of spotting an opportunity in the market.

Throughout a career driven by high-stakes decision making, sources said that Charman stuck to his guns and was willing to make unpopular calls. That being said, he valued colleagues of equal conviction, even if they sometimes disagreed.

Underwriters have always been placed at the heart of his businesses, a responsibility that has seen them both richly rewarded and which can also ignite strong emotions when things go wrong.

That conviction translated into a strong sense of personal loyalty, although he has embarked on long and often vitriolic disputes when he deemed that loyalty to have been betrayed, especially after his unceremonious ousting from Axis.

Ahead of the curve

Charman frequently moved ahead of the curve, transitioning from a traditional Lloyd’s business to play a key role in the expansion of the Bermudian market before joining that business up with a cornerstone domestic carrier looking for an international/specialty play.

Sources described a renegade and anti-establishment figure, often highly critical of areas of the industry he viewed as arrogant or complacent, although this did not stand in the way of him entering the heart of the insurance establishment, serving as deputy chairman of the Council of Lloyd’s in the crisis years of 1995-97.

According to colleagues, he thrived on the adrenaline associated with founding and growing businesses, and enjoyed the fruits of his success.

He became a high-profile figure in British business and the City, hitting national headlines in 2006 when obliged to pay out what was then the most costly divorce settlement in British legal history: a massive £48mn.

Sources described the early days at Axis as some of the best of his career and “John at his absolute best”.

The business was founded after 9/11 in what remains the biggest real-terms fundraise in the history of the sector at $1.6bn ($2.4bn adjusted up for inflation), with sources suggesting he left as much as another $1bn on the table.

For over a decade he led the business, with notable highlights including its involvement in the post 9/11 terrorism market when underwriting appetite was scarce and premiums huge.

“Betrayal”

He was forced out of the company in 2012 in a boardroom coup led by business partner Michael Butt and CEO Albert Benchimol only two months after he vacated the CEO role to become executive chairman.

An angry Charman accused Butt and Benchimol of “betrayal” in an interview with this title, and he was soon parachuted in to lead rival firm Endurance.

It was not all plain sailing at the Bermudian carrier, with a failed hostile bid to take over rival (re)insurer Aspen in 2014.

Less than a year later, Endurance announced plans to acquire Montpellier Re for $1.8bn, providing the firm with a Lloyd’s platform and pushing the business into the $4bn-plus class of (re)insurers.

By late 2016, Endurance attracted a $6.3bn price tag when it was bought by Sompo, a 45% premium to the share price at a multiple of 1.4x book.

The deal was praised as a major coup for shareholders and an astute piece of deal-making at a time when the worst of the soft market was about to make its presence felt for carriers.

Following the transaction, Charman was given a high degree of autonomy to shape the carrier’s approach in international specialty business, a largely untapped area for the Japanese giant.

His relationship with Lloyd’s fluctuated over the years, after coming up in the Lloyd’s market.

He made comments critical of Lloyd’s at Endurance and stated that the carrier would remain outside the Corporation, but gained a Lloyd’s platform as a by-product of the 2015 Montpelier Re deal.

At Sompo International, Syndicate 5151 struggled in the soft market years following the Endurance purchase, reporting a combined ratio of 130.8% in 2017, 107.4% in 2018 and 109% in 2019.

Charman’s aversion to Lloyd’s reasserted itself thereafter, culminating in the unexpected announcement in December last year that the business would be exiting Lloyd’s and continuing to underwrite on company market paper – in a major blow for the Corporation.

In a year of upheaval caused by the pandemic, Charman took time out from super-intending growth to lambast Axis for its large losses and an AM Best downgrade, calling – from his position as a major shareholder – for Benchimol to be dismissed as CEO.

He retires as one of the most successful and distinctive insurance entrepreneurs of his generation, transitioning from the pinstriped days of Lloyd’s in the 1980s to pioneer the war market, helping the Corporation through its crisis years, and playing a key role in the establishment of Bermuda as a major (re)insurance hub.

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