Ep245 Lucy Clarke: Sleeves Rolled Up

Thank you, Mark. Thanks for the invitation. It's really good to see you. It's been a couple of years. It's great to be here, really looking forward to it.

Well, what I'm doing right now is I look after risk and broking for WTW, so that is the Willis Insurance broking part of the business that you know very well, and that also includes Insurance Consulting and Technology, ICT, which is the carrier-focused part of the business, focused on a real long history in consulting and leading-edge technology solutions.

I've been in London for most of my career. I came here in 1990. I'm originally from Houston, Texas, and I'm an energy broker by trade.

Yes, that's right, exactly. It's nice to be able to say Willis again. There have been a lot of, I suppose I would describe it as resetting. We had a big investor day that was billed as, certainly to me I felt it as being, this is where you've come in, a new management team, a new style, and things are going to be re-expressed and reset your aspirations and your strategy.

Sure. And let me just say that I don't really think of it as a reset of our strategy. I just want to maybe answer the question well. I just need to take you back probably to three years ago, which is the last time we set out our strategy. And if you can think back to what was happening then, when they set this strategy out in the fourth quarter of 2021, the Aon merger had been terminated in July or August of that year. A whole bunch of people had left the business. They didn't want to be part of a merged business. We weren't being invited to client tenders anymore. You weren't doing reinsurance anymore. We'd lost a significant amount of business. And so it was an incredibly tough period for that group of people. One of the things that I've consistently said that was so attractive to me about joining here was to join a group of people who could pull off what these people have pulled off in the face of all of that. They just set about making a new plan, sleeves rolled up. That was when they unveiled the specialization strategy. They launched what I would consider today to be the leading digital strategy in the market. They kept good people, they hired a bunch of new good people, and really set out to turn the business around and had a three-year plan to do that. And they did that. And so really what we did in December 2024 at the investor day was just to say, building on those foundations, what's our plan now? And I would just say that that strategy, we've got a specialization strategy that's totally working, so that is really underpinning everything. We're going to take advantage of the fact that we have an advantage in the tech and analytics part of the business, and we're going to maximize the advantage we have as a global broker with really strong businesses around the world. So I wouldn't say it's a reset, I would say it's more of a carry forward.

I would say that they're all part of an overarching global placement strategy. And the placement strategy has a number of themes to it, and one of those is the digital placement strategy. And also I just want to say, I agree with you on some stuff. I agree on your external perspective of Willis as kind of leading the market in terms of technology. I felt similarly, it was one of my external perspectives coming here. And so I had had the experience of we would say stuff like, 'Oh, Willis won the tender in the room because of some analytics work they did or something they demonstrated live in the room.' And so I'd heard that a lot, so I was really interested to see what's here. And it's hugely impressive. The Broking Platform is now in 18 countries, and at its most functional it can receive data in whatever format, make it structured, create a submission, it can run core models over that submission, it can send it out to the markets that you choose, it offers you participations of Willis proprietary facilities that it would fit, and it can eventually bind the business. So today about 25% of our premiums are running through it. I would say by the end of this year, let's say our top eight countries will be 90% in those countries, and the rest of them by the end of 2026. And we're trying to improve the functionality the whole time, but we're all really impressed with what we've seen from the Broking Platform. Neuron has been developed by ICT, the group we talked about at the beginning. Some phenomenal capabilities there. So think of it like an API connecting the Broking Platform to the markets. And that platform also enables algorithmic underwriting, all of that automatic follow, rules-based engines that underwriters can use. So should really smooth out that process. That is not out there yet, we're just developing that right now, so that should be up and running during the course of 2025. Gemini, I wouldn't call it a London facility, I would call it a Willis placement facility. And so it will be one of the facilities that gets offered up on Broking Platform, and it applies to any business in scope. So some stuff will be out of scope, like affinity, and it offers an automatic line at a discount to the lead terms, and part of that discount is for the client. So that should be launched by the middle of the year, I would say.

I think it's important to remember we're not envisaging some world where everything is done by digital placement. It is just to make the transaction easier and smoother, and there'll be different solutions depending on what segment of the market you're in.

Well, for us, and probably for lots of other people too, right now we have a central place where we're running the AI work, and there are hundreds of ideas in terms of what capabilities we can use realistically. And right now we're mostly using AI to change data from unstructured to structured, and using AI to compare policy documents and really basic contractual language, looking at a client's contract and then looking at the insurance product and seeing where there are gaps, and sort of really trying to measure the value of what the insurance they've already got and what can you offer them in the market, and whether that's actually worth more than what they've already got. Because it's always difficult to true up value. What are the terms and conditions actually worth? That would be something that'd be fantastic to get an AI to do. And there are those capabilities for sure. We're just monitoring it really carefully.

You didn't add any value.

Yes, I'm excited about where the market is. I think that it's been a long hard road for clients. And I remember last time we spoke, and it was over two years ago, you were not to say a lone voice, but you were one of the only people I'd spoken to. Most people were relatively excited about the hard market because obviously if you're a carrier you were excited because it was time to sort of rebalance everything. But actually many of the brokers also were kind of saying, 'Well it was probably a bit overdue.' But you were one of the only ones who was sticking up for the client, saying, 'Come on, the client's taken a beating now four years in a row, now it's time maybe to have a...' At least probably fell on deaf ears that time, I think. But now the market's a bit more competitive definitely. And I think our perspective then was, 'Come on guys, enough is enough.' So really happy to inevitably see what's happening in the market now. And I don't think it's like a really one-sided thing, because you still hear underwriters talking about underwriting profit, and there's still plenty of rating adequacy, or at least obviously enough of them believe that to be okay with where the rates are. And I don't hear people saying, 'Yeah, we're writing for income.' I definitely think there's still discipline in the market. But I think that the market's being more reasonable about where it is, and to make sure that clients get recognized. This has not been an easy period of time for them. So I'm excited about it. I think it's only going one direction. Obviously there are pockets in the market where things will be different, some real heavy cat stuff or a certain industry or your loss record's terrible or something. But largely I think people will be seeing improving conditions every underwriting cycle. The programs are probably now posting their second year of 80% something combined ratios, and they're all saying, 'Yes, I'm still happy to grow. Most of the things I'm seeing are still very rate adequate. I'm happy to write more of this at this sort of level, but I'm not going to throw the baby out with the bathwater either.' But at least that's going to give you a lot more optionality, I suppose.

I think it is very specific. I mean, the wildfires are an absolutely massive loss, very surprising kind of magnitude. 40 to 50 billion, I guess, is the sort of numbers that we're talking about. But even a loss that big, maybe there was a pause, but I don't really see it affecting the direct markets other than what people look to do in terms of California and in terms of business flows.

So I think that it's happening exactly like it happens at every point in the cycle, where more business is staying in its local market. It's not a huge difference today, but you can see that happening. Tough business is still coming to London, coming to excess and surplus lines markets, but that is what happens every single time. So it's expected, but we're not expecting a huge wave backwards. But it's happening.

Yeah, I think I would have been one of the people who would have said, 'Oh, this is definitely a cyclical thing.' And it's definitely not. It's here to stay. MGAs are providing an important role in the market. For us specifically, we have our Veritas MGA in the US. We'll be launching that in Great Britain and in Europe later this year. And I think that it's a really important part of the strategy. Our MGA strategy is sort of niche products where there's a scarcity of capacity, and also a way to distribute our Willis proprietary facilities throughout the group, because I suppose they have to take the format of being an MGA, something that you're technically doing the underwriting on behalf of those capital providers. But definitely a strategy that I can't see going away.

Yeah, we see it as addressing specific needs in the market.

I like them to be attached to a balance sheet. That's my... I like that because a client can get paid more easily. Yes, I respect the new model, but I like for them to be attached to a balance sheet. But these days they're attached with much longer-term deals, doing three or five year deals with their paper. I suppose it's almost like having a balance sheet but not quite the same. But so that's not the kind of thing you're going to be doing. So those MGAs are really there because they're very niche, they're very specific. There is a problem the insurance industry is not very good at solving. Here's someone who's got an answer, and now we can aggregate the capacity behind them so you can move fast. So I think that's also a difference, being able to respond quickly, which is really important.

I wouldn't really limit it to that. I would say that of course during the last three years, for reasons that are totally understandable, we've been somewhat out of the market while the business was reshaped. But Willis is a big business in geographies all over the world, in every segment of the business, in every client segment, in every specialty line. So there will be a lot of opportunities. So I think for us, and hopefully for the people that we acquire, cultural fit will be really important. I think we would be an amazing home for certain types of businesses. And obviously for those businesses it will be important to them as well.

Yeah, do call us. We don't want to assume that we're not in the market. We are.

Yeah, exactly.

Okay, so I'm hugely excited about the reinsurance business. And so in terms of what can people expect from the reinsurance business, well I guess overarchingly it will be a reinsurance business led by reinsurance brokers, of course. It's an independent platform. We are very lucky to have Bain, who've been amazing to work with. They bring huge firepower, of course, they bring brainpower, don't they? That's the absolutely real operational expertise. They have a track record of building innovative businesses in this industry. So that part has been really great. Of course, as WTW we have the ICT business, so all of the technology solutions to offer. And then we have Willis, the insurance broking business around the world. Everybody is very excited to support the buildout. And I think we have a real once-in-a-generation opportunity to build a reinsurance business of quality and scale. And very, very excited about that.

Yeah, that's part of the attraction of the deal is to have Willis behind it, enthusiastic about it, and we are. And how we will do it? Well, it's a lot harder than I imagined to stand up a totally independent platform. The team's been phenomenal. They've got multiple entity setups across geographies around the world, tax filings, regulatory registrations, director's filings. You can't just turn up, can you, because you need a license. It is a phenomenal amount of work to set up the platform, and they've done a great job on that. So our plan is an organic build, but it doesn't mean that anything else would be off the table. But that is our plan.

There could be, yeah.

Yeah, so that is an option for us to acquire the whole business at a point in the future, and that is our goal to do that. That's also the great advantage, because you can do this in private and you don't have annoying people like me asking questions and you don't have to have the analysts asking you every quarter how it's going.

We're psyched about that part, yeah. But that will be a little bit later down the road, keeping your media team busy and keeping all of us in the media busy, of course.

Well, that sure would be nice if they were calling up the brokers and asking them for their perspectives, because that is really important. And that would be one of my big pieces of advice: please consult on the stuff that will matter to our clients. It's not that nice to be surprised. Just let us know what your plans are, let the broking community have some input. So I think that's important. I also think that because of where we are in the cycle, there'll probably be some natural concern about underwriting discipline, but to not be overzealous on that, right? And let the guys write their books. And we talked about rating adequacy earlier. And two other things I guess on this emerging risk stuff. I mean, I don't know, it's kind of silly to call cyber an emerging risk, but where there are emerging risks, I'm a huge supporter of Lloyd's, of course. I'm a London person, so I think of Lloyd's as the center of insurance, and I want them to continue to have that reputation. So I just think it's important to continue to have that reputation, to be responsive and act quickly, to be able to find solutions to some of these challenges our clients are facing. And so enabling that, Lloyd's enabling that, will be a very meaningful thing. I want them to do practical stuff. So every time we apply to have a facility, I want them to just speed it on through. And hopefully solve the digital blueprint to stuff, yes, you can all solve that expense ratio together.

Yes, I want to finish, yeah.

Yeah, absolutely, yes.

Yeah, and I think maybe that type of sentiment might be why it's taking so long. But definitely we are on the cusp of it, that is without question. That makes it more frustrating because it's so close.

But it will be transformational for the industry. I think it'll be great to give our clients that type of experience where they have a kind of a light-touch experience and get everything they need at inception when they need it. I think it'd be great for them as well. You know, it's a great platform for risk, but now if it was a great platform operationally as well, you'd say, 'Well, why would we not be using this?' And of course you've got that digital distribution, you know, that people in your global network could be pressing a few buttons and some of that could be placed automatically with no friction whatsoever. That could be quite powerful.

Well, maybe just what was attractive to me about joining Willis. Well, I have always had kind of a little bit of an obsession about Willis. And during the Aon thing, I talked about it incessantly. I don't know, I think I was sort of reacting to what I saw as the injustice of the whole thing. And this incredible brand, and this brand that represented quality and integrity. The idea that the brand would be gone and there wouldn't be a Willis, I talked about it a lot anyway. And then when everything happened and the merger got terminated, I guess for me the thing that was really attractive about joining is to see how people reacted here. And I thought that was a phenomenal performance. I thought it was something I really wanted to be part of. You know what it takes to be a person who works here in a moment like that, and to stay when you could leave. And a lot of those people, believe me, I tried, could have left, but they stayed. I just thought I wanted to be part of that. I think a lot of the people who have joined since are people who are up for the fight. And so that's really what's attractive to me about it, is joining the people that work here. And I think that we have a lot of advantages. We have, as we talked about, that tech advantage, analytics. We have those people. The people are phenomenal, very resilient obviously. And I think we have the credentials to go up against the biggest global players. And I think we probably want it a lot more than they do. So I think it's going to be a great place to be.

That's right. Lots of opportunity there. Isn't anywhere where we don't have opportunity.

I would like to add something, Mark. I think really one of the biggest opportunities for us in this market is to really focus on the service that we're providing to our clients. I think that over the course of my career, I definitely see this as an area where the market is very inconsistent. And I think to be the broker that focuses relentlessly on the right service for our clients, and it isn't just the big bang stuff like we settled this amazing claim or we got this price in the market, but our debit notes are accurate, they're out on time, we provide you a certificate of insurance on time. We have aspirational ideas about when you should get these things. That is a massive focus for us. And I think it's a very attractive thing for people who work here and people who want to work here, because people in this industry are here to provide service to our clients. And so being in a place where you can really see that as a priority has been a great part of being here.

For me it was like, there's a 100-page document and I now have to go through it, and there probably 50 things that are wrong. And having to kind of go back to London with the 50 things that are wrong, say, 'Oh don't worry, you know,' but it was very demoralizing thinking, 'God, this isn't great, is it?' A client shouldn't have to experience that. Now if it's all in a digital portal, you could self-certify, you can quickly get a certificate wherever you want it, bang, you know, you could press a few buttons and hopefully these things are all really good.

Well, I think we've had the most success with the specialty strategy, and so that is yielding a lot of opportunities. So we're continuing to focus on that. And then we're just trying to improve the service in our client segments, like in the segment to make sure that we have technology solutions to improve our clients' experience there. But I see the specialty areas as probably our biggest opportunity. The way that the world is, everything's getting more complicated. New things come out all the time. And literally this morning, private companies putting rovers on the moon, which would have been the sole domain of NASA only 20 years ago. Seems that opportunities are abounding in really complicated and quite technical things. I think for our clients, they are in every industry, they're all different sizes, but they really share this being in a really complicated, complex, connected risk environment. And so really helping people try to unravel that, I think, is part of the trick today to really being a good insurance broker.

Thank you, Mark.

Good, I look forward to it. Thanks so much.