Steve McGill, Founder of McGill and Partners, Talks About the Start of His Firm, Talent in the Industry, and Where He’s Headed Next
After a long career with Aon, Steve McGill and some financing partners founded the specialty broker McGill and Partners in May of 2019.
The firm has since experienced substantial growth and is taking aim at the U.S. market.
What follows is a transcript of McGill’s discussion with Risk & Insurance, edited for clarity and length. There is additional commentary from Daisy Jackson, the firm’s chief of staff.
Risk & Insurance: We associated your name for a very long time with Aon, and you’ve had a fairly long career. I was curious about why you’re doing this at this point in time?
Steve McGill: I felt that there’s a lot of great competitors in the market, and Aon is one of the finest. I had a wonderful 12-year career at Aon, the last five being privileged to be group president of the entire firm and responsible for the worldwide insurance and reinsurance broking business.
When I looked at the landscape, I was thinking about the last chapter of my career. I definitely did not want to retire. I wanted to do something and do something pretty profound. And I was looking outside the industry as well as inside.
I had some interesting discussions with the British government about supporting them on Brexit negotiations. They were looking at bringing in business leaders to support the government. And this was at the very early stages of Brexit. As I was having those discussions, I thought one of the things that would be incredibly interesting and exciting would be to build a global specialty firm actually focused more on the larger corporate clients, where expertise was at a real premium. To build a firm centered out of London but with extremely strong transatlantic links. But build a firm that was deliberately different by design.
It was two years in the planning that was consistent with my contractual obligations with Aon. So from 2017 to 2019, it gave me the opportunity to do extensive research analysis, business planning, and talk to potential financial sponsors.
As I was continuing to do the analysis, I became more compelled that this was an exciting opportunity.
I also looked at what happened over an extended period of time in the investment banking community, in the adjacent financial services sector. There were some interesting comparisons. Because you had three really high-quality global institutions in Morgan Stanley, Goldman Sachs and JP Morgan Chase, which compared and contrasted with three world-class professional service firms in Aon, Marsh and Willis.
And then you had a number of quality firms that were similar in the way they went about their business. They provided broad services to all clients ranging from personal lines up to large complex multinationals. And firms that were focused on the middle market. Particularly the likes of the Gallaghers and the Locktons that were very successful in that space.
I saw this opportunity to build a firm focused on the large account sector that was practitioner-led, operating through a single profit center, where the key criteria is getting high-quality talent with a strong depth of technical expertise, intimately understanding their clients and the insurance and reinsurance markets and being able to deliver cutting-edge sophisticated solutions for those clients.
For a firm that is focused on being highly specialist with a talent acquisition strategy at scale, serving this client segment, it’s a really exciting time to be back in the industry and serving clients.
In the investment banking world there are these super boutiques like Evercore and Moelis & Co., another very successful firm, that over time took a 36% market share out of the industry. And it was all about high-quality talent working as teams, serving clients in a very distinctive way. I felt there was an opportunity for a similar model in insurance broking.
I’m delighted to say that since launching the firm in May of 2019, which was when we got the financing from a world-class financial sponsor in Warburg Pincus, the oldest private equity firm in the world, we’ve managed to make extraordinary progress. Especially in 2020, the year of COVID, we haven’t missed a beat.
R&I: It’s inspiring that you did your research, took a shot and it’s working out. Could you quantify for us just how successfully things have gone for you?
SM: We currently handle 273 clients with exposures across 85 countries.
The first thing we did after getting the financing in May 2019 was focus on recruitment of talent starting in London. I’m delighted to say that we were able to build out a pool of talent of the highest quality.
That was helped by structural changes in the industry, obviously. Marsh bought specialty broker Jardine Lloyd Thompson. I’d been there for 15 years before Aon. The founder of Lloyd Thompson, who ended up buying Jardine’s to create JLT, John Lloyd, is a great friend of mine. He partnered up with me following Marsh’s decision to buy JLT. Since then we’ve managed to recruit a lot of high-quality talent. Not just from our old firm but from right across the industry. Today we have hired over 300 people from 58 different firms.
We operate across seven specialties: complex property and casualty; energy and power; marine and cargo; financial lines and special risks; aviation and aerospace; a business called structured solutions; and reinsurance, both treaty and facultative.
In 2019, our revenue was $7.5 million dollars. We started in the last quarter taking on clients. In 2020, our first full year of operating, our run-rate revenue was $60 million. We’re handling $1.5 billion of run rate premium today. And we have, as I said, 273 clients, serving some of the most high-profile multinational firms in the world. Our hit rate has been very good. We’re continuing to attract talent and we’re continuing to win clients.
In 2020, the one frustration we had because of COVID, and not being able to travel, was that we had extremely high ambitions for our U.S. business centered out of New York, and we put that largely on pause. But now we’re in 2021, COVID or no COVID, and we’re investing dramatically in the United States. You’ll see us moving that number up, I expect.
In a relatively short period of time we’ll have recruited over 100 staff in the United States, again, focused on areas of specialty. We’re at 24 staff in the U.S. at the moment, but we can expect that number to increase substantially.
R&I: We all know we’re in the midst of a talent war, not simply in broking, but all over the industry. You’ve already given us some good touch points, Steve, but just expanding a bit. How are you differentiating yourself as you seek out this U.S.-based talent?
SM: Well, some of our clients have very kindly referred to us as the SEAL Team Six of the industry or the Special Forces. We believe there’s a really interesting opportunity to build an elite firm that doesn’t try to be all things to all people and doesn’t actually accept all client assignments and doesn’t actually accept all talent.
From that sort of framework, what has been resonating with clients — and I’ll ask Daisy to comment on this as well because it’s pretty important — we absolutely recognize that the assets of the firm are the people in it.
We launched a colleague value proposition in 2019 that we called the contract of trust. Essentially, the contract of trust said we’re employing high performing colleagues who we very carefully scrutinize, that not just one person interviews, but four or five people. The process is pretty rigorous.
We want colleagues who are proud to be part of a team, not colleagues where it’s all about themselves — the individual. So it’s a team-based culture. And in our contract of trust we have no defined working hours. We have no defined holiday. We have 12 months maternity leave fully paid. We have six months paternity leave, fully paid. We have caretaker’s leave.
We basically said, “We expect you to perform to the highest possible standards. But we’re actually going to trust you to work in the ways that is most productive.” Which actually, and this predated COVID, it meant if you can work remotely and work from home, you can, because all of our technology is 100% cloud-based.
If you need to come into the office, that’s great. If your working hours are not nine-to-five or eight-to-six and they need to be different, we’re very flexible. One of the reasons for that is we wanted to make sure we could attract not only high-quality talent but high-quality, diverse talent into the firm.
We want colleagues who are proud to be part of a team, not colleagues where it’s all about themselves, the individual. So it’s a team-based culture.
We created what was an industry first. It was actually reported in the Financial Times. And that combined with a culture of teamwork, practitioner-led business, focused in a very defined area of client segment, we were incredibly surprised by the reaction and the reception we got from talent broadly in the industry.
Daisy Jackson: I think we all know that broking is a people business. We have to put our talent front and center in everything that we do to drive our strategy forward.
As a firm, I think we’ve reaped the benefits from this approach. We had our contract of trust way before we went into COVID and enforced lockdown. And we’ve seen how that has allowed us to transition so seamlessly.
I think our clients can see it as well. We’ve got great teamwork across the firm. As Steve said, we have a single P&L. Which means that you break down those silos between different product lines and can offer one combined solution to the client. It’s working well. The culture at McGill and Partners is what really stands out and attracts talent to the firm as well.
R&I: No place for a lot of ego, it sounds like.
SM: We have what we call a no-jerk policy. And we’re very proud of it. Everybody is a shareholder in the firm, from our receptionists all the way through to management. And so there’s a real alignment of interest around building the firm. It reinforces a single profit center. We’re really excited about the future.
When we went into lockdown, we triggered our crisis management plan on the March 17. At that time, we had 130 people in the firm. And today over 300 people have been hired. We’ve got a pipeline of another 100.
If you talk to me in three months’ time, our U.S. ambitions will be starting to be realized in an extremely material way. And that’s exciting. That was part of the original plan, to build a global firm with two very big centers of excellence, London being one and New York being the other.
R&I: That sounds very dynamic, Steve. Is it possible to talk about your philosophy around the breadth of the carrier pool that you work with?
SM: We have relationships with 197 carriers worldwide.
Because of the nature of the business that we’re handling, being large complex clients, you’ve got to have the expertise to access capital all over the value chain, whether it’s insurance or reinsurance, and do that across the world to meet the needs of clients.
Inevitably, we have very strong, high-quality relationships with some of the biggest insurers in the world. I’m very proud to say that we’ve got phenomenal support from the likes of the Chubb, AIG, Berkshire Hathaway, Allianz, Zurich, CV Starr and Lloyd’s of London, of which all are really excited to be partnering up with us in very distinctive ways to serve this client segment.
R&I: You mentioned doing your research and looking for that talent. And finding the right talent to really make this a success. Can you give us the names of a few pickups or hires that you really felt good about?
SM: I would say we’ve been stunningly successful in attracting talent. I wouldn’t particularly want to single out anyone, because I think people in the industry have been pretty amazed by the talent pool we’ve been able to attract.
What I would say is it started with the combination of John Lloyd who founded JLT, who is the chairman of McGill and Partners, along with myself.
The partnership of the two of us coming together to build a firm was, in a way, an indication of the fact that we both wanted to do something impactful and special. We had different relationships and connections with colleagues. We had different skillsets. And we were both very committed to building a firm for the next generation of leaders. We’re both passionate about doing that and doing it for the benefit of not only the firm but the next generation of colleagues who are coming through.
R&I: One more question, if you don’t mind. There’s so much going on. We know all about cyber, COVID, climate change, political unrest. These global clients of yours, can you speak to us about what they most urgently require? If you’re that SEAL Team, where are you jumping in these days?
SM: I think for starters the three Cs is a good place: cyber, COVID, and I’d add cost.
The challenges with cyber are never ending. The insurance market is evolving dramatically. It’s important to keep pace with that and make sure that as best as one can, that there are insurance solutions to provide cyber insurance to clients.
But obviously, everybody’s concerned about the consequences to any business of cyber attacks beyond the insurance proposition.
COVID, obviously, has redefined for everybody the working landscape. And then we think the second and third order effects of this pandemic when we’re trying to sort of assess what does the new normal look like, I think is a focus on everybody’s minds. And you can debate whether there are some extremes who were saying, “I want colleagues back into the office full time.”
There are other extremes that say, “Actually, we don’t even need an office. You can work 100% remotely.”
Our personal view is it’s probably going to be a balance. I feel that when you’re doing sort of strategy work and or innovation, quite often, you do need to meet together as this is a relationship business. So having connectivity beyond just Zoom calls is important.
Cost, though, is important, because with COVID there’ve been certain businesses that have been winners. Lots of businesses, you only need to look at the airline industry that we specialize in, are incredibly challenged. And every cost is scrutinized. Of course we’re in the face of an insurance market where insurance rates are going up double-digit every quarter. Losses are coming home to roost. There are debates as to whether COVID is going to ultimately be a $100 billion-plus loss.
It’s certainly going to be substantial. You’ve got all the casualty exposures related particularly to the United States. Then you’ve got the frequency of catastrophic losses unfortunately that are occurring. Tornadoes used to be quite a rare event. There are now frequent wildfires on the West Coast of America. You only need to look at the storms in the first quarter in Texas. I mean, things are changing dramatically. And the insurance market hardening and the implications of that for clients on coverage limits, retentions, pricing are pretty profound. And it’s happening globally, not just in a specific geography.
All of that plays right into the skillset of McGill and Partners, which is having a practitioner-led model focused on structuring the most efficient and effective risk transfer solutions in the world for major clients. So for us, the timing of the launching of our business dovetailed with the challenges of the hard market. Add to that the incredible structural changes we’re seeing in broking with the Aon acquisition of Willis, the Marsh acquisition of JLT that was concluded in April, 2019, other M&A activity of broking firms, the landscape is rapidly evolving.
For a firm that is focused on being highly specialist with a talent acquisition strategy at scale, serving this client segment, it’s a really exciting time to be back in the industry and serving clients. &