Zurich unit strengthens its large commercial market presence;
ING gets added personal lines, small commercial business
By Phil Zinkewicz
Robert Landry was recently named president and chief executive officer of Zurich North America Canada. He has worked with the company for more than 30 years.
"It's a whole new ballgame."
That's how Robert Landry, president and chief executive officer of Zurich North America Canada, describes the company's market focus, including the recently struck strategic alliance with ING Canada. Under the terms of the alliance, which was launched in January of this year, ING has acquired Zurich's Canadian personal and small business P-C book of business and, in turn, Zurich Canada is now renewing large commercial and corporate policies previously underwritten by both organizations.
"We have changed our business focus," says Landry. "We have narrowed our markets and are working to consolidate and grow our leadership position in the large commercial and corporate insurance arena."
Landry was named president and CEO of Zurich's Canadian operations in May of this year; but he is no newcomer to the company, having worked with the firm in various capacities for more than 30 years. He stepped up to the executive level in 1992 as senior vice president for field operations, and in 1997 became president of Zurich Canada's personal financial solutions division. Most recently, he was president of the company's commercial division. In his new role, Landry is leading the implementation of Zurich's strategic focus on corporate, commercial and specialties property/casualty insurance in Canada.
"The ING-Zurich alliance is now enabling us to effectively focus our efforts and leverage core competencies in commercial property/casualty insurance," he says. "The alliance consolidates our position as an industry leader in large commercial and corporate lines and gives us approximately 20% of that market in Canada. We are also a major provider of non-traditional and alternative insurance solutions to international companies headquartered in Canada and look forward to expanding that position
as well."
"We wanted to expand our market share at the high end of the commercial lines business by working with clients who typically have more than $300 million in sales ... ING is very large in the personal lines area and was looking for ways to grow. It was a perfect fit."
--Robert Landry
Zurich North America Canada is part of Zurich North America, a business division of Zurich Financial Services Group. Zurich has served the Canadian market for more than 75 years. Zurich North America is a leading commercial property/casualty insurance provider, serving the multinational, middle market and small business sectors in the United States and Canada. Headquartered in Schaumburg, Illinois, Zurich North America has 11,650 employees and wrote $10.9 billion in premiums in 2001.
Commenting on the motivation for the Zurich Canada-ING alliance, Landry said: "We, like all insurers today, do not have unlimited capital. We wanted to expand our market share at the high end of the commercial lines business by working with clients who typically have more than $300 million in sales. We had been doing personal lines business, but we realized that that particular area wasn't giving us the returns our shareholders were demanding. On the other hand, ING is very large in the personal lines area and was looking for ways to grow. It was a perfect fit. As for our personal lines customers and their brokers, we knew they would be serviced by a professional and reputable company. It's a unique situation. I have not seen another example of two companies that were fierce competitors joining together in this fashion. We have made the transition with minimal disruption and ING tells us that their retention rate on the business they assumed is better than expected."
Landry said that the alliance between Zurich and ING will certainly benefit from the current hard market. "Historically, the Canadian insurance market follows the American market with a 12- to 18-month lag time. In Canada, we are seeing rate hikes of between 20% and 50%, depending on the line of business, and there will be more of the same in 2003. Insurance companies in Canada had an ROE of less than 3% in the first six months of 2002, so we have a long way to go to make up for the soft market years that preceded this current hard market. In addition, reinsurers are already positioning themselves for further rate increases for January renewals, so the hard market will probably persist for quite some time."
Another reason that the market will stay hard for a longer time in Canada is that there is not a great deal of new capital coming into the market despite rate increases, says Landry. "One reason for that is that new capital tends to flow into the larger United States market first," he says. "Another reason is that, in Canada, we are more highly regulated than other countries in terms of required capital, so decent returns on new capital are more difficult to earn.
"Again, mirroring the United States market, we're seeing more claims volatility in the liability area," says Landry. "Class action lawsuits are increasing and the mold problem is beginning to rear its ugly head in Canada. We leverage our New York office's expertise to assist us in writing professional E&O and D&O lines of insurance. Here again, we're seeing rate increases as the result of fears about what has taken place at companies such as Enron and WorldCom. Understand, I am not saying we're seeing the dramatic premium increases in these coverages that we see in the United States. But we are experiencing significant premium increases in these areas nonetheless."
Landry also stresses the importance of Zurich's international capabilities. "Exports represent roughly 34% of Canada's Gross National Product and we expect that number to grow," he says. "Insurance companies that can understand and manage global risk have tremendous opportunities because of the internationalization of the business world, but they face challenges as well. The opportunities, of course, come from their clients that are expanding internationally and that need additional protection. The biggest challenges stem from insurers' needs to understand the character differences of other markets, including local insurance regulations and laws. That's where we feel Zurich Canada is uniquely positioned. Our link with Zurich's international expansive expertise and experience gives us a step up because we can access and build on that expertise. Well over 50% of the companies we insure today have exports in the United States and/or overseas."
So, with its ability to capitalize on the organization's international network of insurance and financial experts and the new ING alliance in Canada, Zurich Canada is positioned well for growth. But what of its distribution force? Landry says that Zurich Canada is working diligently to assist brokers in the current hard market. The brokers that Zurich had that were primarily personal lines producers have a committed insurance company in ING, Landry says. Those brokers serving larger commercial clients are benefiting from Zurich's focus on servicing that market diligently. Zurich is helping brokers, many of whom are having great difficulty placing business, by letting them know very clearly that Zurich Canada is no longer a "generalist" but now a "specialist" with very defined target markets, he says.
Adds Landry: "In support of our increasingly specialized focus, our corporate clients are being serviced by experienced teams organized by industry segments. This segmented and relationship-based approach gives us an in-depth knowledge of our clients' issues and enables us to develop customized solutions that will help Canadian corporations thrive over the long term. In addition, our claims department has been completely overhauled to be better aligned with our customers' needs. This is one of the strongest value-added features Zurich offers our Canadian customers. Our expert claims handlers are trained to assist our clients in mitigating their losses and facilitating a return to business as usual in the event of a serious loss. We strive to help clients recognize and reduce their exposures. Through risk analysis, safety initiatives, business contingency planning and other strategies, our risk engineering department helps corporate customers manage and reduce their risks more effectively."
Those things may sound like boasts, but Doug Swartout, chairman, president and CEO of Aon in Canada, believes in them. "Zurich's understanding of risk, its global commitment and its underwriting ingenuity make it a leader in the Canadian insurance industry. The Canadian team works extremely hard to provide the sources brokers are seeking and they design solutions with the customer in mind."
Zurich's clients agree. "To cover the risks of operating in a global environment, corporations need a financial partner that can offer flexibility, long-term commitment and a global perspective," says Glenn Leroux, vice president, risk management at George Weston Limited, a Canadian food processing and distribution company. "Without question, Zurich fits that bill." *
For more information:
Web site: www.zurichcanada.com