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Exceptional, July-December 2012 - The policy maker: Catlin - EY - United Kingdom

Exceptional, July-December 2012The policy maker

“If you’re going to build a business for the future, which is what I believe a true entrepreneur does, there are no shortcuts, or if there are, I haven’t found them“
Stephen Catlin, Founder, Catlin Group.

Turning risk into reward is all in a day’s work for Stephen Catlin, founder of the global insurance and reinsurance company Catlin Group.

During World War II, Stephen Catlin’s grandfather ran a small printing business in London that was badly damaged twice during German air raids. The second time it happened, his workforce turned up at the bombed-out shell of the premises to be told the grim news that he couldn’t afford to pay them.

“He was worried about the reaction but they said to him, ‘Don’t worry about it, just pay us when you can,’” recalls Stephen Catlin. The example that his grandfather set, in terms of how to build a mutually supportive relationship with employees, inspired Stephen’s own management style.

“By and large, people treat you how you treat them, so if you treat them well, it will influence how they treat you in return,” he explains.

It’s a lesson that has proved invaluable to the CEO and founder of the global insurance and reinsurance company Catlin Group.

Back in 1984, Stephen started the business as a small underwriting agency operating solely at Lloyd’s of London; today, it has a market capitalization of £1.44b (US$2.31b), employs more than 1,600 staff and has 56 offices situated in 21 countries around the world.

While the company may have enjoyed rapid expansion over the past 28 years, Stephen says that the fundamental principles that the business abides by have largely remained the same, particularly with regard to employee relations.

Capitalizing on opportunities

So, too, is the ability to identify and capitalize on an opportunity to grow. While many insurance companies were looking to become more risk-averse in the wake of the 9/11 attacks on the US, Stephen recognized that there was going to be a severe dislocation in the market, with companies needing insurance coverage more than ever.

Rather than rein in its exposure, he saw an opportunity for his business to take up the slack. But to do this, he needed capital.

The market conditions at the time were far from encouraging, with the Lloyd’s market having posted an aggregate loss of £2b (US$3.22b). “At that stage, being a Lloyd’s business or being associated with Lloyd’s was not favored particularly highly by the market, so going straight into an IPO following 9/11 would not have been practical,” he says.

As a result, Stephen was forced to put the IPO on hold until 2004 and instead raised nearly US$500m in private equity capital during 2002. The company went from underwriting US$434m worth of premiums in 2001 to US$1.4b in 2004, including taking a leading role in underwriting insurance covering property damage arising from terrorist acts.

Taking the initiative

Stephen had pinpointed the need to expand Catlin’s operations overseas as early as the mid-1990s. At a time when the global economy was evolving rapidly, Stephen had realized that insurance businesses based at Lloyd’s could not afford to sit in their offices and wait for business to come to them.

Success depended on the creation of offices worldwide, so, in 1999, Catlin established its first overseas outposts in Singapore, Kuala Lumpur, Houston and New Orleans.

These ambitious expansion plans are not without their challenges, however.

Last year was the second-largest catastrophe claims year on record for the insurance industry and the costliest ever for the Lloyd’s market, which incurred total net claims of £12.9b (US$20.5b), including £4.6b (US$7.31b) of catastrophe claims.

It served as a wake-up call for some insurance operators, although Catlin managed to weather the storm successfully.

“The trick of it is to make sure that you stay in the black if you can, which is what some of the market, including ourselves, managed to achieve last year,” says Stephen. “Risk is part and parcel of the business that we’re in. You’re going to get good years and you’re going to get bad years, so we need to make sure that we structure our books accordingly.” This long-term view has been crucial to the company’s growth over the past 30 years.

The other key challenge for Stephen is to ensure that his company continues to “employ and keep good people who share our values,” just like his grandfather did all those years ago. “If you’re going to build a business for the future, which is what I believe a true entrepreneur does, there are no shortcuts, or if there are, I haven’t found them,” says Stephen. “The secret is a lot of hard work and treating people properly. That’s really critical. It dictates your success or your failure.”


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