Marsh and McLennan Companies CEO, Brian Duperreault, reportedly told attendees at the recent Insurance Day Summit in Bermuda that the proposal to revive the New York Insurance Exchange would face an “uphill battle” to create a market in current conditions. While this view certainly has some truth to it, and many of his observations about the issues facing the effort to revive the Exchange are well taken, the concern is that these views are preventing engagement in a unique opportunity by many potential insurance and financial participants.
One of the most challenging hurdles being faced by the Exchange working group established by NY Superintendent Wrynn is the “wait and see” attitude of many key players – let’s see what “they” come up with before we decide if it will work for us. Hopefully, Mr. Duperreault is not placing Marsh in this category. Given all the publicity about the revival efforts, and the fact that the Exchange would be a brokerage market, why wouldn’t Marsh – or any major US based brokerage firm -- jump at the opportunity to actively participate in the effort – to help with the design, structure and scope of the Exchange? And why wouldn't any broker, underwriter, manager or investor that utilizes the Lloyd's market be interested in creating a similar market closer to home? Rather than leaving the decisions on the look, feel and structure of the Exchange to others, the time to participate is now while the input has meaning.
Mr. Duperreault reportedly stated, “The last New York Exchange started at absolutely the worst possible time in that market and that didn’t work out too well to say the least.” While it is true that the Exchange opened during a soft market, it was conceived and constructed during a seriously hard market. Now it is being considered during a soft market, but by the time it is constructed and operational it could very well be in a hard market. The lesson is that the exchange cannot and should not be viewed as a product for a moment. It should be viewed as a marketplace for the long haul, with the structure and flexibility to address changing market needs. With enabling legislation already on the books and the New York regulators providing the impetus and support for the revival effort, it would be disappointing indeed if the insurance and financial industry leaders did not take full advantage of the opportunity to support and participate in the initiative.
It is also disappointing when leaders like Mr. Duperreault feel the need to take a gratuitous shot at the experience of the old Exchange. Aside from perpetuating the misconception that the Exchange market failed*, the circumstances are far different today than they were 30 years ago!
What Superintendent Wrynn and his staff need now is insurance and financial industry leadership in helping take advantage of current circumstances to move the Exchange forward. Everyone agrees that there are many challenges in making this happen, but the gain in creating a potentially significant, modern and flexible market should be incentive enough to make it worth the effort.
This effort, however, needs Architects -- not cynics! Builders -- not fabricators! Players -- not spectators!
*At the time the Exchange’s Board of Governors chose to close the facility there was a significant, well-structured and capitalized group of syndicates willing and able to continue with the Exchange. For more information on the history of the original Exchange, including the Board’s decision to close the facility, see my article “The Once and Future New York Insurance Exchange”, February 2010, at www.pbnylaw.com (on the Insurance Exchange page).
NOTE: Although I am a special advisor to Superintendent Wrynn's Insurance Exchange working Group, the views expressed by me above or elsewhere on this topic are solely mine, and do not necessarily reflect those of the Superintendent, the Insurance Department or the Working Group.