8 minute read
Bigger is even better
Scott Leney has moved into a new regional position after playing a key role in the Marsh-JLT integration
By Wendy Pugh
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Marsh’s merger with rival JLT last year not only doubled the size of the global brokerage in Australia but also delivered benefits that Scott Leney says have made the group particularly well-placed to assist regional clients facing a tough insurance market.
Mr Leney has taken on the newly created position of Risk Management Leader for Asia and the Pacific, broadening his focus after last year playing a key role in the integration of the merged business as Marsh Australia Chief Executive.
The new position reflects an accelerated pace of change that has amplified existing risks and created new ones, with the situation exacerbated by COVID-19 and market impacts from higher prices and capacity changes.
“These things are felt most acutely in the large complex end of town, and really our clients have never needed us more,” Mr Leney tells Insurance News. “Organisations have got to manage through this, but also create their own future in a post-pandemic world.”
New York-based Marsh & McLennan Companies has also named Mr Leney Country Corporate Officer in Australia, encompassing the broking and consulting businesses of Marsh, Guy Carpenter, Mercer and Oliver Wyman. More than 3100 people work for the combined group in the local market.
Mr Leney says the broad regional and Australian roles are complementary and the focus is on bringing the best the company can offer across its client base.
“If you put the brand names aside, Marsh & McLennan is in the business of risk strategy and people, and it has huge breadth and depth and capabilities to help our clients meet the challenges of the world and thrive,” he says.
The risk management position involves working with major clients across Asia and the Pacific and includes those operating in countries such as South Korea, Japan, Hong Kong, Singapore and Australia, as well as emerging markets.
Mr Leney, who is based in Sydney, reports in the regional role to Marsh Asia Chief Executive David Jacob and Pacific Chief Executive Nick Harris, whose area now includes Australia, New Zealand, Fiji and Papua New Guinea.
“The larger the client the more complex in terms of the breadth of their business, the size of their geographic spread, the more the need to get across quite complex risks and design a program that blends self-insurance with traditional insurance, alternative risk capital and those sort of things to bring about the right risk program,” Mr Leney says.
The coronavirus pandemic is currently the top risk focus for clients around the world, affecting a number of insurance lines and with impacts likely to remain unknown for some time.
Business interruption has emerged as a controversial area where the insurance industry is facing battles over cover.
“It is an interesting situation,” Mr Leney says. “In some cases insurers may be held liable for business interruption claims perhaps they didn’t intend to provide coverage for.
“But secondly, the reaction to that point is to implement very broad exclusions going forward, which has the potential to exclude coverage that they don’t actually intend to exclude, so going from one extreme to the other.”
Marsh is among firms flagging the concept of government and private partnership arrangements through risk pools to respond to future pandemics, helping to minimise economic and social consequences of outbreaks and assisting businesses to plan ahead with more confidence.
“We think that the right solution is a collaboration between the industry and the Government to come up with insurance pools similar to the terrorism insurance pools that have been created around the world, including in Australia,” Mr Leney tells Insurance News.
“If there isn’t sufficient protection for organisations as they think about the ongoing risks of pandemics, you would think it would lead to a more conservative approach, less investment, those sorts of things.”
Among the broker’s major clients in Australia, directors’ and officers’ cover also ranks as a top risk issue. The market has continued to deteriorate, with premiums surging and capacity reduced as insurers withdraw from an increasingly volatile market.
Securities class actions against listed companies and a rise in litigation funding has been blamed as a major cause of problems, and Marsh has been highlighting the need for reforms to alleviate market pressures.
The firm has made submissions to the Australian Law Reform Commission and to a Federal Parliament committee inquiry examining litigation funding and regulation of the class action industry. The committee’s report is due before the end of the year.
“We are hoping the outcomes of that parliamentary inquiry will help to alleviate some of these underlying causes that are giving rise to a dysfunctional insurance market for directors’ and officers’ liability insurance,” Mr Leney says.
In other lines, Mr Leney says the hardening market still has some way to run, with price drivers differing from past cycles dominated by catastrophe event impacts.
“The difference with this particular market that we are in now is that it is a consequence of sustained soft pricing and sustained lack of insurer profitability,” he says. “COVID-19 has just exacerbated matters.”
He says there’s a sense that pricing is nearing levels insurers feel are needed for risks they are now underwriting, but reserve blowouts from prior years are still hitting results, particularly for those with large liability portfolios.
“The unknown is the continued reserve development from prior years and the impact that is having on their book of business, and obviously, right now, how big and impactful the COVID-19 related losses are going to be on their portfolios.”
The Marsh and JLT integration was fortunately completed well before the coronavirus outbreak created extra complexities.
Marsh & McLennan gained all clearances for its $US5.6 billion takeover of JLT early last year, with Mr Leney assuming the local Marsh chief executive role as soon as the deal took effect on April 1. Australia became Marsh’s third-largest country as a result of the transaction.
Mr Leney says there are many business world “war stories” about acquisitions, and statistics to the tune of 80% never truly working as anticipated, but the Marsh-JLT integration has been accomplished smoothly, with colleagues old and new embracing the opportunities.
“We did a lot of work in the early stages educating ourselves on the importance of culture and the dos and don’ts. The single most important thing not to do, which is the contributor to most M&A failures, is to wash out the acquired culture.”
While he found a lot of similarities between the firms in terms of values, there were also different cultural approaches and ways of doing things. The merger has involved blending teams as much as possible, bringing fresh ideas and new approaches to legacy JLT or legacy Marsh clients.
“JLT was a lean and hungry contender to the big two brokers of Marsh and Aon, and they were very successful in that space,” Mr Leney says.
“Our plan was to embrace the best things of both organisations and create a new culture for our organisation moving forward. That is even more necessary, and makes plain sense, when you think that these were two companies about the same size in Australia and the Pacific region that were coming together.”
Mr Leney is well-placed to appreciate the evolution of Marsh, and what JLT could bring, after entering insurance more than three decades ago through a cadetship program run by UK-based broker Sedgwick.
The program included tertiary education, rotations around the company and a six-month secondment to London. Sedgwick was acquired by Marsh in 1998, and Mr Leney has continued to take up new opportunities and broaden his experience within the company as it has grown.
That has included sitting on the Asia Pacific executive committee and the international executive committee, as well as the Australia and Pacific chief executive roles. He established a diversity and inclusion committee within the Australian and New Zealand businesses, and says the issue will remain a focus.
“I certainly don’t intend to take the foot off the pedal on those types of things because of this role change I am moving into now,” he says. “I still think I have the scope to be able to make progress in those areas with the rest of my executive peers.”
Mr Leney would normally be jumping on planes to travel across the region at this time as he takes up his new responsibilities, but says there are advantages in using video conferencing to link up with his network overseas as COVID-19 restrictions remain in place.
“It is much easier to get all of the right people, regardless of where they are located, on a video conference and the meetings are more efficient,” he says. “I am finding it a bit of a blessing in disguise in terms of my ability to get up to speed quickly and engage with the network.”
Mr Leney says he has always been impressed with Marsh’s capabilities, its talent and how well positioned it is to help clients, and that is even more the case now with the strengths contributed by JLT through the merger.
“You obviously go through a period of time where the focus goes internally as you are bedding down such a large acquisition, but now the whole focus on the organisation is outward and completely focused on our clients in these pretty tough times,” he says.
“When you blend those two cultures together what you have is a highly professional large organisation, with a huge breadth of capabilities but with a new rigor around challenging the status quo, moving quickly and really concentrating on the challenge a client needs to solve.”
