Perfect Timing
Steve England, executive vice president of Ironshore Insurance Services and overseer of Ironshore's U.S. field operations, said his first meeting with the company was in a pizza shop.
"We didn't have any office space, computers, nothing," England said. "The first thing we had to do was get ourselves up and running with equipment."
Just three years after it was founded, Ironshore Inc., which focuses on specialty commercial insurance, has seen explosive growth in 2009. The company is expected to double its top-line premium this year. It's entered several new businesses, opened a myriad of offices--now 13 in the United States--and will have doubled its number of employees to 350 by year-end.
Ironshore was founded in the Cayman Islands in 2006, in the aftermath of Hurricane Katrina, to focus on property catastrophe insurance. The company shifted gears at the end of 2008 to focus more on casualty lines, and now has established operations in Bermuda (as Ironshore Insurance Ltd.); the United States (Ironshore Holdings U.S. Inc.); and London (Pembroke Managing Agency Ltd., a Lloyd's Managing Agent, established to manage Syndicate 4000).
England, who oversees U.S. field operations, likened the growth of the company to "changing tires at 50 miles per hour."
"We're building a culture of entrepreneurs," England said. "One common thread you hear when you talk to people about Ironshore is that they want to do something new. They want to be on the ground floor of something new."
Ironshore was founded by well-known industry leader Robert Clements, who also launched the insurance broker Integro. Clements also played a role in launching other Bermuda-based insurance companies, including Ace Ltd., XL Capital Ltd., Mid Ocean Ltd. and Arch Capital Group Ltd.
As a clean, fresh face, Ironshore was well-received in the marketplace, and well on its way to transforming from a startup to an up-and-coming company when the financial storms of 2008 struck. While competitors struggled to find their sea legs in the turbulent financial waters, Ironshore saw an opportunity to attract new talent and new business.
"It's a good time to build," said Shaun Kelly, chief executive of Ironshore's U.S. operations. "We feel very fortunate about the types of businesses we are building and type of people we are attracting to build those businesses."
Veteran Leadership
While Ironshore is a new player in the market, buyers have flocked to Ironshore partly because the company has excelled at hiring well-known industry leaders like Kelly, said Jim Rubel, executive vice president of insurance broker Lockton.
"They have very seasoned veterans, from the top down, and that includes the ‘Kelly Boys,'" Rubel said.
The "Kelly Boys" refer to Shaun Kelly and Kevin Kelley, who were hired from American International Group's Lexington Insurance last December to fill top positions at Ironshore.
Clements had a long-standing relationship with Kelley, then-chief executive of AIG's excess and surplus lines carrier Lexington. Ironshore's founding CEO, Bob Deutsch, stepped aside and took the title of Ironshore's president as Kelley came on board to become Ironshore's CEO. Kelley brought his top Lexington lieutenant, Shaun Kelly. Kelly, who had been Lexington's president, was named CEO of Ironshore's U.S. operations, and added the title of president when Deutsch stepped down in March.
In the months after their arrival, the company announced the creation of new Ironshore units, each headed by the top leadership of AIG and Lexington companies from the same business lines--environmental, U.S. property, U.S. specialty casualty, program and life science.
"The whole franchise changed its focus from being a property-oriented carrier to having more of a casualty focus," said Mark Murray, senior financial analyst at A.M. Best Co. "The company was effectively born again in 2008 when Kevin Kelley came. From our vantage point, it was viewed as a startup again beginning in 2008, because the business portfolio changed so dramatically."
More Than One Hat
The company has grown so fast that its executives often are asked to do more than one job. For instance, those tapped to head Ironshore's regional distribution offices in the United States also are the heads of particular business lines.
"It's a little different model," England said. "Every time someone showed up, they picked up three or four hats and put them on. It gives us a person that is managing the overall operations, but also has an interest in writing business for his particular unit. It ties everyone closer together...It's all about maximizing the resources we have in the field."
At Ironshore's Lloyd's operation, there's no line separating underwriters from claims managers, said Mark Wheeler, underwriting director of Pembroke.
"We don't have an underwriting team and a claims team. Our underwriters work in conjunction with claims professionals, internally and externally. The demarcation is by product line. The responsibility of the claim rests with the underwriter," Wheeler said.
He also said the underwriters have the authority to set the language and price and to negotiate the claim.
Niche Markets
Ironshore closed the Pembroke acquisition Sept. 9, 2008, in the midst of last fall's financial meltdown.
"The whole market was in quite a bit of flux," Wheeler said. "XL, AIG and Swiss Re were facing unprecedented problems. One of the principal corollaries was that risk syndication became the order of the day. Literally overnight, companies wanted to spread their risk. It was crack timing for us."
He said Ironshore is hoping to build "what we consider the best-in-practice, highly focused specialty business in London."
That's a reference to profit, Wheeler said, not size. "We aren't trying to write a broad range of products. We are very specialist at what we do. The higher the intellectual barrier is to writing a product, the more interested we are," he said.
For instance, the company writes professional liability coverage for asbestos engineers and security consultants in the Middle East, and offers a product for maritime interests that's similar to kidnap-and-ransom, to cover against attacks of Somali pirates--perils not for faint-of-heart underwriters.
XL Capital Ltd.'s CEO Michael S. McGavick said Ironshore "hasn't shown up on the radar too much."
"While [Ironshore's] growth rate is significant, their total presence [in the market] isn't that great," McGavick said. "But it's not surprising that anyone with a brand name like Kevin Kelley is going to get some business. We would expect them to have some success at getting a footprint in the market. And knowing that Kevin is a very careful underwriter, while the growth rate will be strong, I think it will be hard to build up a great book of business in a market like this."
Rubel, who heads Lockton's global property practice, said Ironshore has not been growing at AIG's expense.
"They've grown because the capacity for people who will entertain that class of business has shrunk," Rubel said. "They are one of a handful of critical markets that offers capacity in troubled areas, cat-exposed risks. They supply needed capacity for that."
Kelly also said the company has not grown at the expense of competitors.
"We have hired people from various backgrounds and companies in the industry. Having had worked at Lexington and AIG, you develop a lot of relationships, and this business in many ways is about relationships. But the people that I know and that my colleagues know go across the entire P/C spectrum, not just one or two companies," Kelly said.
England estimated that fewer than half of Ironshore's new hires came from AIG. "It's not as many as you'd think," he said.
Aligning the Stars
The company has also aligned itself with several prominent industry leaders. It launched Bermuda-based IronStarr Excess Agency Ltd., a joint venture with C.V. Starr & Co. Inc., which is headed by AIG's former chairman and chief executive, Maurice "Hank" Greenberg.
"Anytime you can do a strategic venture with Mr. Greenberg, you take advantage of that," Kelly said. "He's an icon in our business, and deservedly so. We are pleased with our venture with C.V. Starr, and we will keep that type of venture in mind for other opportunities down the road."
Ironshore also worked out a deal with another industry icon, Warren Buffett. Ironshore will provide Berkshire Hathaway's National Fire and Marine with a reinsurance treaty agreement. Ironshore Environmental also has an exclusive managing general underwriting contract with National Fire and Marine.
Under the contract, Ironshore Environmental markets, engineers and underwrites environmental risks with a term of five years or longer, with the policy then placed with National Fire and Marine.
Investment Boost
In August, Ironshore announced that it had raised $300 million in equity capital to continue to expand its specialty business. Lead investors were GTCR Golden Rauner, a private equity investment firm that initially purchased $200 million of newly issued equity of Ironshore; Calera Capital, one of Ironshore's founding private equity partners, which invested $50 million; and other investors who placed the remaining $50 million.
"We probably could have raised more if we were interested in deploying capital that quickly," said Mitch Blaser, chief operating officer and chief financial officer of Ironshore and CEO of Ironshore Bermuda.
Blaser said there are no immediate plans for an initial public offering or a strategic deal, but Ironshore might consider those options in the future. He said that while the company is not publicly traded, it does offer employees stock options.
"Our growth story has been a controlled one," Blaser said. "We've had the capital to support it. If we reach a point where the access to capital is a bigger issue, an IPO is one way to get there, but it's not the only way. There's no pressure for an IPO."
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Ironshore Insurance Ltd.
A.M. Best Company # 78528
Distribution: Brokers
For ratings and other financial strength information visit www.ambest.com.
