Eye of the Storm

“We hire kids out of the local colleges here, train them for a couple of years to be reinsurance professionals, and bring them up through our farm system . . . . It’s a really good deal for the other [brokerages],” Karon acknowledges, “because they can just wait five years, pay the guy $10,000 more, and get a perfectly trained-up reinsurance broker, claims payer, contract writer, catastrophe modeler—whatever they need.

“I was talking to a McKinsey [consulting] partner the other day,” Karon continues, “and he said the same thing: ‘We’re just a feeder group for the private equity funds. It drives us crazy but it’s also flattering.’ Here, we’re a feeder group for the reinsurance, underwriting, and brokering industry.”

Far from shutting down the training operation, Karon says he wants to “ramp it up massively” by training more of Benfield’s non–U.S. employees. Benfield employs 2,000 people globally. About 700 of them work in the United States, 460 of them in the Twin Cities. The company puts about 40 employees into its training program each year, half as new hires out of school and half from Benfield’s overseas offices. (In addition, it trains a few employees of the insurers and reinsurers who are its clients.)

“Our training program is a huge competitive advantage for us,” Karon says. “Technical proficiency is really important, because we do contracts that are worth hundreds of millions of dollars. Getting the technical part right is hugely important, and analytics is hugely important. And as the capital markets and the reinsurance business continue to converge, it continues to get more technical.”

Karon says he wants to rely on proficient technicians, not generalists and salespeople. True, many of his graduates are lured away, but many stay. The training is “how we protect our culture,” which is “aggressive, analytical, and entrepreneurial.”

Gee-Whiz What-If Technology

Karon’s career at Blanch coincided with a push by the company, beginning in the late 1980s, to gain leading-edge technology for catastrophe modeling. Technology isn’t what drives the reinsurance brokerage business; “acts of God” and the market forces of risk and reward do that. But technology is at the foundation of what reinsurance brokers offer to their clients.

Reinsurance brokers are basically consultants and financial middlemen. Their clients are primary insurers who write policies covering property, medical malpractice, workers’ compensation, and so on. (Benfield works in those and other areas, though it specializes in catastrophe reinsurance. Karon says that Allstate, for instance, is a major Benfield client.) Brokers help those clients figure out how much reinsurance they need, and then help them buy it, traditionally from reinsurance companies such as Germany’s Hanover Re, Zurich-based Swiss Re, and Lloyd’s of London.