It sounds like the opening line of an old joke:
Three seasoned executives go into a hardening insurance market – a broker, an underwriter and a marketplace manager.
Yet for us privileged observers of the global (re)insurance firmament it is just the beginning of a particularly exciting and revealing week that will witness the launch of Stephen Catlin and Paul Brand’s Convex venture, Steve McGill’s new broking operation and John Neal’s prospectus for a new Lloyd’s.
All have excellent resources at their disposal – the broker and underwriter have major funding commitments and access to more if required, while Lloyd’s has the wherewithal of a marketplace that wrote $46bn of gross premiums in 2018.
This poses a question – if you had almost unlimited financing, how would you go about transforming insurance distribution, underwriting and the world’s only functioning insurance exchange?
The first observation is that while the broker and the underwriter have to start from nothing, this is their comparative advantage.
They may have no current income or market position but they have the luxury of starting with a blank piece of paper.
Like 19th century Cadbury brothers looking for a place to expand into state-of-the-art facilities, they have ample greenfield sites at their disposal upon which to build their model broking and underwriting villages.
Today’s green fields are mostly intangible.
Instead of the location of canals and railways, the key infrastructure for today’s businesses relate to access to capital, regulation and licensing, operational efficiency and the availability of technological, financial and legal services.
The start-ups have no legacy and the luxury of being able to choose technological platforms that give the maximum promise of flexibility and scalability for the future.
Old heads running new companies have the ideal opportunity to apply the lessons of a lifetime and start as they mean to go on.
This is why it is highly significant that Catlin and Brand have chosen to outsource everything that is non-core from day one.
And, given McGill’s pioneering use of outsourcing, there is almost zero reason to think he would ever opt for a 100 per cent in-house model today.
Neal has the more challenging operational task.
With over 300 years in business, Lloyd’s has legacy in abundance. Neal will also have to manage day-to-day operations while at the same time designing and building a futuristic new manufacturing plant.
And while much of Lloyd’s legacy is physical, perhaps a larger portion is cultural and emotional. The battle for hearts, minds and imaginations will be crucial.
And here is the crux of the matter.
For all the intangibility and the footloose, virtual nature of today’s global capitalist ventures, Catlin, Brand, McGill and Neal are faced with one immovable and solid reality: a strong and willing pool of labour is still key.
What’s more, motivating and enthusing that workforce to embrace their exciting ventures and projects is still the most important objective.
Without the best workers a model village is just a collection of buildings, pipes and cables, no matter how utopian their arrangement.
What made the original Bournville such a runaway success for Cadbury was the recognition that the workforce, hitherto used to squalid living conditions and exploitation, was the company’s key asset.
Superior skills and supreme loyalty were locked in for generations. It was a visionary move.
Today’s business visionaries instinctively know that Bournvilles still need townsfolk if they are to thrive.
Even amidst the uncertainty and cost disadvantages caused by Brexit, it is gratifying to see the enduring allure of London as a core hub for underwriting and broking.
As an indispensable location for all three ventures, London is clearly to insurance what Birmingham was to the manufacture of chocolate.