Life after Aon

Life after Aon

The broking sector’s mega-marriage failed, but Willis Towers Watson is confident about being single again

By John Deex

The merger of Aon and Willis Towers Watson (WTW) would have created the world’s largest insurance brokerage – a global giant with a combined equity value of $US80 billion.

The deal was first mooted in March 2019, before fading like a mirage and reappearing in more substantial form a year later.

The merger was subject to regulatory approval – something which, thanks to US regulators, ultimately could not be achieved. Competition concerns sounded the death knell for the project in July this year, and the companies separated.

Aon paid WTW a $US1 billion termination fee – but having gone so far down the road, how difficult is it to turn back?

WTW Head of Australasia Simon Weaver says while much time and effort when into preparing for the merger, WTW is stronger for it.

“In terms of how involved it was and how far the business got down the track, it was a drawn-out and extensive period,” he tells Insurance News.

“But what’s come out of it is really illuminating. I can’t speak for the other side, but from our side it’s probably brought us out re-energised, and certainly refocused and confident and optimistic.”

WTW’s new global leadership team hasn’t been slow in repositioning the company, which has 45,000 employees in 140 countries. It already has a new strategy rolled out – “grow, simplify, transform”.

One unexpected aspect was the decision in August by the newly separated WTW to go ahead with the divestment of its highly regarded reinsurance business to Arthur J Gallagher. That sale, worth up to $US4 billion, was originally intended to ease European competition regulators’ concerns about the Aon merger.

However, WTW will retain its facultative reinsurance operation and some corporate risk and broking units in Europe that were originally also up for sale.

Mr Weaver says no confidential information was shared between Aon and WTW, but being able to compare his company to a major global competitor “had many benefits”.

“It allowed us to compare strategies, processes, and systems and people. Knowing how we stacked up against a major competitor allowed us to come out feeling actually very confident about our independent status.

“It has given us a clear picture of where we want to focus and where we want to invest.”

And while some staff left as the merger process progressed, Mr Weaver says they’ve returned in droves since the deal collapsed.

“No doubt globally we lost people. We’ve been open about that. But we didn’t lose them because they didn’t want to be part of Willis Towers Watson. We lost them generally because of uncertainty around the future.

“Here in Australia, certainly, our competitors were looking to unsettle us. But actually, over the period we’re talking about, we hired more people than we lost.”

Simplifying the complex global broking business means cutting the number of separate geographies and business segments, and aiming for easier-to-navigate internal platforms, enabling employees to work more efficiently and get to market faster.

The “transform” part of the strategy targets efficiencies, particularly in real estate as the post-COVID work environment settles down.

As for growth, WTW aims to be earning $US10 billion plus in revenue within three years.

Growth is also a key focus for the local business, which has 700 employees but “isn’t yet at the scale of Marsh or Aon”.

“We’re a pretty significant business, but as a business we feel we should be bigger,” Mr Weaver says.

“We’ve identified Australia and New Zealand as priority areas to invest in. We see an opportunity in the market because there’s a bit of a disruption going on, but also the model we’re developing and the areas we’re focused on have a lot of relevance for clients here.

“I want to double our revenue in five years. That’s our internal target – it’s pretty aggressive.

“We’ll be building off a strong base, but to get to double the size it’s going to be a mixture of organic growth and hiring people and teams. But also, we’ll look at acquisitions if we find those that are relevant and fit in with our own culture.”

Mr Weaver believes that aligning to client demands and market trends will fuel the growth he’s looking for.

He also wants WTW to be a long-term adviser to clients, backed by deep data analytics and benchmarking.

There’s opportunity in the current hard market, he says, because large, sophisticated buyers are “not particularly well served” by other brokers.

Independent future: WTW’s Simon Weaver

“The reason I say that is because board agendas have moved towards a focus on emerging risks. And we’re finding the insurance market is not particularly capable of responding effectively.

“At the same time, the market has been particularly difficult over the past two or three years.

“If you’re a broker, if you’re an adviser to a client, and you’re just sitting there instructing them that their insurance has gone up in price, or they can’t get the cover they used to have, that’s not a satisfactory conversation to be having.

“We’re really trying to position our engagement over the long term. We’re trying to align the client’s strategy in terms of where they’re taking their business and then advising them on how they’re going to get there and how their risk financing might need to adapt.

“It may be that insurers will not be able to provide cover for certain risks. It may be there are better ways of financing some of those risks.

“But to have that conversation, you’ve got to have some really deep data and analytical capabilities. You need tools. You need benchmarking. You need to be able to run models and loss scenarios.

“Without that sort of intellectual input, it’s impossible to advise those clients about how to build their risk financing strategies over the next few years. We’re trying to move in exactly that direction and we’re finding clients in Australia are becoming more and more receptive to that.”

While not its main focus, WTW is also increasingly interested in the local SME market.

Mr Weaver sees it as an area that’s “ripe for disruption”. “If you’ve got an established SME model that is large, complex, cumbersome, interdependent, full of frictional costs – I think you might be worried now. You might be thinking, ‘how am I going to adapt to the future?’

“Because the future in this space is going to be very dynamic. It’s going to be digital. It’s probably going to be AI-influenced. It’s going to be product and industry-specific. It’s going to be streamlined and low-touch, and very efficient.

“That is an interesting area we’re looking at quite carefully to see whether we can deliver something different to what’s available now in Australia.”

Mr Weaver highlights three risk areas of focus for WTW – climate, cyber and people.

On climate the company has developed its Climate Transition Pathway (CTP), a unique framework that it says could be a game-changer.

If a client gains pathway accreditation from CTP, then WTW has lined up insurers to provide cover for that business.

“It’s not just about setting low targets, it’s about having a proper robust climate transition plan, aligned to the Paris agreement” Mr Weaver says.

“Insurers are exiting the high-carbon industries. They are not interested because of their own investors and ESG policies.

“They will not provide insurance going forward. But if they sit behind Willis Towers Watson’s climate transition framework, insurers – and we’ve got some global insurers signed up – will now provide access to capacity for those clients.

“So instead of having no insurance at all and having to bear all the risk on their own balance sheet, we’ve got a unique proposition to allow these companies to have certainty around insurance. And we will help them as long as they continue down their climate transition pathway to help provide a sustainable future.

“In this part of that world there are many businesses that may find that an attractive opportunity.”

With cyber, it’s about more than just insurance cover. Mr Weaver says brokers have to understand the client’s industry, systems and the level of protection they have in place to prevent and respond to attacks.

He believes there is a lack of choice in the cyber cover that’s available at present, despite recent growth in the market.

“There’s a very limited set of options available even now. I think if you looked at statistics you’d see cyber insurance increasing year on year, but we still don’t feel that clients are getting the right response from the market, and the market is obviously very cautious. It’s such a dynamic risk.

“That’s one area we will invest in this year. We will bring in more cyber capabilities to have better and broader conversations around what we can do in the market.”

On people risk, WTW is bringing together a broad range of services including workers’ compensation, but also super, health insurance, training and development.

“The traditional solutions to just about every one of those things are provided by separate products or separate providers,” Mr Weaver tells Insurance News. “And so, while it might be dealt with by the same person in a client organisation, they’ve got to separately work out, who’s going to do my health insurance? How do I structure it? Who’s going to deliver my super fund advice? Who’s setting up my worker’s comp?

“What we’re trying to do is address each of these areas in a combined way, because we have rich data in all these areas, and we can bring them together.

“By combining the data and putting it into a user-friendly tool, we see a really good opportunity to address this in a way that clients haven’t seen before.”

The proposed merger with Aon was heralded as “a natural next step” that would deliver better outcomes to stakeholders and increased innovation – until the US Department of Justice intervened.

But while so much effort went into the failed proposal, Mr Weaver doesn’t see it as wasted work.

So much was learned, he says. Going through the process crystalised the company’s vision for the future, and the collapse of the deal brought an end to a period of uncertainty for clients and staff.

“Now we’re back as an independent business,” he says. “We’re here to stay and we’re here to grow.”

Royal appointment

While Simon Weaver was at university in his native UK, companies visited to check out potential recruits.

The first to offer Mr Weaver a position was Royal Insurance (now part of the RSA group).

“I started with Royal and I loved it,” he said. “I loved insurance from the first minute, but particularly the client interaction.”

As soon as he could, he switched to broking, and relocated to Asia in 1996 with JLT.

“I loved the fact that brokers could sit with clients and design coverage and work with insurers and deliver them what they needed. I thought that was really appealing.

“And then you start to meet clients in all these different industries, and learn about their industries. I’ve always found it fascinating.”

In 2013 he joined Miller as Asia CEO. When Willis acquired Miller in 2015, he ran Willis in Asia for three years before being appointed WTW Head of Australasia in 2019. Most recently, in addition to his Australasian role, Mr Weaver has taken on the position of Head of Corporate Risk & Broking, Asia Pacific.