The 2020 Insurance Executives to Watch: AIG’s Duncan Ellis

Long a fixture in property brokering at Marsh, Duncan Ellis makes the move to AIG to be part of a revamped underwriting approach at the venerable carrier.
By: | November 11, 2019

The news in mid-September that Duncan Ellis was moving over to AIG was noteworthy. After all, this was a person who led the property practice at Marsh for 10 years. Overall, he’d spent 27 years at the global insurance brokerage.

So why this move? Why go to AIG now and not some other brokerage? Or why not take a position on the client side, where, as an experienced broker, he’d be more than comfortable and no doubt competent?

Of his leadership position at Marsh, Ellis said, “It was a dream job. It was an amazing group of men and women, an amazing group of clients.”

“But after 10 years of running that group, I was looking for an opportunity to do something very different from what I had been doing. That said, I never really felt that there was anything that was going to present itself that would satisfy that desire, to the extent that I wouldn’t say I had dismissed any sort of move, but it certainly wasn’t front-and-center on my to-do list for 2019.”

Like all of us, Ellis was watching when Brian Duperreault came out of retirement to run AIG, his professional alma mater, where the St. Joseph’s math major cut his teeth as an actuary and underwriter decades ago.

Duperreault, now AIG’s CEO, made no bones about the fact that there would be changes at the venerable insurer. Putting out big lines with not enough reinsurance to buffer the risk wasn’t going to cut it. Not on his watch.

Let us not forget that it wasn’t that many years ago when Mr. Duperreault took over the reins at Marsh, McClennan and Cos. At the time, he was focused on the people who could get the job done, asking them what made them tick and why they wanted to stay in an organization, Marsh specifically, that was suffering through some cultural malaise.

Not too long after Duperreault’s move back to AIG, Peter Zaffino, once head of Marsh, joined Duperreault’s quest to bring underwriting sanity and a more robust esprit de corps to AIG.

“I’d worked with AIG since 1992, when I first joined Marsh,” Ellis recalled. “I saw and dealt with such an amazing company back then, and even today dealing with a great company, but it was a company that was very different from those early days of my brokerage career.”

Ellis thought to himself, “I think some of my traits and characteristics and management style could lend itself well to a company like AIG.”

And so over he went.

To say that for a property specialist like Ellis to move to a carrier at this point in time is an “interesting” decision is soft-pedaling it. As this is being written, almost halfway into the fourth quarter of 2019, renewals are the most difficult they have been in more than a decade.

Buyers of insurance who had gotten used to lower commercial insurance prices, year after year, for renewal after renewal, are getting some rude shocks. Carriers pulling out of lines, and price increases in the hefty double digits are not just random events, they are widespread.

“There’s been significant movement in pricing in 2019 because there needed to be,” said Ellis.

“The property world had been on a steady premium march downward, almost a race to the bottom. Who was going to get there first?”

According to Ellis’ analysis, property carriers had given up so much premium over the years that was coming mostly from the CAT premium allocations within buyers’ programs. Such CAT premium reductions, and the absence of CATs, was allowing carriers to post combined ratios under 100. But as soon as CATs happened, they were deeply in the red.

“There was no room, whatsoever, in their numbers to manage the CAT,” Ellis said.

Eventually, rates started to move.

“Post-2017 is when we started to see some discipline in the marketplace around rate increases, but those rate increases were more focused on those accounts that were catastrophe-exposed and had losses pursuant to those 2017 windstorm events, or that had significant underlying attritional loss problems.

“We were seeing moderate rate and premium increases in 2018, but 2019 has been a completely different animal with rate and premium uplift, along with changes in limits, terms and conditions,” Ellis said.

“No one wants to see their premiums going up 10, 20, 30, even 60%. I empathize and recognize that it’s a very difficult message and one that needs to be explained in detail,” said Ellis.

“Unfortunately, it’s the result of years of reductions, broadening of terms and conditions, which lead to years of unprofitability. That has come to an end with many carriers, one being AIG, saying, ‘This is not sustainable, we need to have a course correction and fast.’ That’s what we’re seeing right now.”

Ellis’ expertise on property pricing is one element, one reason he’d be an asset to a carrier.

But he thinks there are others.

“I think I can definitely bring a very client-centric approach to the organization,” he said.

“There are some of those softer factors that I also bring in to play, having spent 27 years on the client side. Looking beyond the objective aspects to underwriting to find the good in the bad and the bad in the good.

“As I said before, no one likes a big increase, I get it. But I think when you really sit down with brokers and insureds and explain what’s going on in the marketplace, they get it.”

Ellis has only been at AIG for a matter of weeks. But coming in, he’s using three words to describe his approach.

“One is transparency. That’s sitting in front of a buyer and being transparent around what we’re doing and why. I sit in front of a client and say, ‘If you had a strategy that was not sustainable, what would you do? Would you carry on like that? Or would you make changes?’ Inevitably everyone has the same answer: You have to make changes. That is what is underway here at AIG.”

The second word is consistency.

“I want AIG, specifically retail property, to be consistent around what our offering is. I think anytime you don’t have consistency, it inserts a worry factor into the equation, and clients get worried that they are not going to be able to rely on you.

“I’m looking at creating that level of consistency where a client can say, ‘The offering we got from AIG this year is going to be the offering that we’re going to get from AIG next year.’ ”

The last word is sustainability.

“It’s all about creating a model that is sustainable over the long run. Anybody will tell you, never-ending rate reductions, be it 10 years, 20 years or 50 years, is not sustainable. It’s just not.”

We’ve spoken to Ellis many times, and this is as excited as we’ve heard him.

“I had the privilege at Marsh for 10 years of running that group. A privilege that I never took for granted and gave 100% to every day. Taking on this new challenge at AIG is something that I will equally immerse myself in with, the opportunity to work alongside a fabulous group of young men and women who I hold in high regard having worked with them on the brokerage side for so long.

“So, when the opportunity presented itself to come here, it was irresistible to me.” &


 

For the full list of Insurance Executives to Watch in 2020, click here.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]