Ep323 Steve McGill: We're only really getting started

0:02I'm Mark Geoghegan and you're listening to the Voice of Insurance podcast, produced in association with Advantage Go, now part of Sapiens, enabling an enterprise view of exposure. Today's guest is someone who's been building a business from scratch over the same timeline that the Voice of Insurance has been going. Over that seven-year period, we've checked in from time to time to see how things have been progressing. and now Steve McGill is back on the show because, in his own words, chapter one of the organic build of the global boutique insurance and reinsurance intermediary he founded is now complete.

0:35With major new investor EQT on board, this podcast recaps chapter one and looks forward into what the next phase in this remarkable business's development might bring. Steve is an inspiring person to spend time with. Starting a broker from scratch and growing only via talent acquisition is extremely hard to do. The history books are littered with cautionary tales of similar lofty ambitions dashed. I think it's Steve's clear vision, resolute conviction and determination that have carried him through. And now that the core platform has been built to scale, the next chapter of accelerated growth looks particularly exciting.

1:10Steve has a track record of being ahead of his time. He was a pioneer for facilitisation and, as I remember, took quite a lot of flack for it. Now that the market is catching up with him on an industrial scale, We have an in-depth discussion of this phenomenon and where it might take us, overlaid with another detailed look at what AI might do to the insurance value chain. We even get to learn what Steve has in common with Kim Kardashian. This is a longer podcast than usual, and we should all be grateful for that, because the more time you spend with people like Steve, the more value you get. Enjoy the podcast.

1:45Steve, welcome back to The Voice of Insurance. Really great to see you again, and fantastic. I suppose they're not new, new offices, but they're incredibly new offices for me. The last time I interviewed you, we were across the road. Not as standout an office space as this is absolutely amazing. Well, it's great to be back, Mark. It's great to have you interviewing me in the new office. I say new office, but we've actually been in this wonderful, iconic building in the city. And we've got two floors here and we've got 400 colleagues in the office with room for expansion. This has got a huge footprint, this office, hasn't it?

2:20It kind of spans Leadnall Street and Fentret Street, doesn't it? And it's just a world-class office, and it's great to welcome you and welcome our clients and carrier partners here. And of course, our colleagues absolutely love it. You're always moving so fast. So if it's been a couple of years since we last spoke, fill us in on where McGill and Partners has got to, in terms of revenue, headcount, that kind of thing. Yeah, it's interesting, because this is the third discussion we've had. The first, I recall, was... It's pretty during lockdown. It was June 2020. Yeah. And it was our first full year of trading.

2:53And obviously, we're in the midst of a global pandemic, which for a startup business was interesting and had its challenges. And we saw the opportunity there to lean in and be on the front foot and win. And we navigated through that very successfully. And then the last time we spoke was actually April 2023. I can't believe that. Yeah, time flies by. And now it's October 26, and we've continued to grow our business. Today, our revenues are north of$300 million commission and fees. As you know, it's all entirely organic. We now have 620 colleagues in the firm. We are growing 2025 over 24. our sales growth was 23%.

3:48That in 2026, over 25, that's accelerated somewhat. So we're between 25 and 30 % organic revenue growth in a market that has got some challenges. So we've got real momentum and our main centers of excellence continue to be London and Dublin as our gateway into Europe and New York and Chicago, Minneapolis and Miami in the United States, where we serve a lot of our reinsurance clients, where we really support our partnerships being our retail and wholesale broker partners on the ground in the US, and also a very select handful of large global corporate clients. You were a top 10, I think it was the insurer, a top 10 reinsurance broking list, and you're on it.

4:39And that's pretty good from a standing start in seven years. And we've just sort of gone up the list. I think they just published it and we're now number seven. So that's an indication of the progress we've made on the reinsurance side where we have a phenomenal team of colleagues covering treaty, covering facultative reinsurance, and also sourcing capital for MGAs, which is a fast growing area. and doing hybrid solutions between treaty and fact where we've got particular expertise and capability. Actually, we've got a question here about MGA's view later on, so we're going to part of that for a minute.

5:18I suppose what triggered me to thinking, God, I've got to get Steve back on the show, is, of course, this milestone you've just come through. Obviously, you start off with Warp of Pincus. You've just done the deal with EQT. This is now your capital partner going forward. I suppose it's a good time to reflect, isn't it? It's a massive milestone in the development of any business. What's it all about? What's it going to bring to you when you've got new capital as well? And what's the highest priority destination for that capital? Where do you think I'm going to deploy any of this new money that's coming in?

5:44And where am I going to get the best return for it? I think it's a real inflection point for the business and an incredibly positive one. And I kind of look at our soft launch in October 2019, right through to the announcement of EQT as a new partner on the 4th of September this year. I look at that as sort of chapter one of the journey, and it's been an absolutely extraordinary experience. The progress we have made as a firm with our colleagues and with the support of Warburgs and with the support of our fantastic clients and our carrier partners is unprecedented in the industry in 50 years. No, it hasn't happened.

6:29People have tried, and it hasn't worked. and that's why startups 90 % of startups generally fail and startups in the insurance space insurance broking space at scale have really been viewed as challenges you know a wholesale broker sort of spun off on their own because of a particular specialism and they've done okay but they're not something that has global ambition you know we've had one or two of those in my lifetime and they haven't necessarily worked. No, and naturally, not only is it hard to do this at scale in broking, but it's just generally extremely challenging to organically grow a business, any business, not just broking, not just financial services, but any business, to build a business in seven years navigating through a global pandemic and actually have the validation of the second largest and one of the most prestigious private equity firms in the world being EQT agree to an enterprise value of$2 billion.

7:32Not only is it a valuation we're very proud of, but it is pretty unique in the annals of business. And just to give you a perspective on this, because we analyze the statistics, if you looked at all the startup companies in the UK and the US where you've got really good quality information on startups. The number of firms that started businesses in the US and the UK combined was just under 4 million in 2019. The number of firms that managed to raise significant amount of capital, that managed to navigate through the global pandemic, and that managed to build their business organically and achieved an enterprise value of$2 billion or higher.

8:25Do you know what the number of firms is? There's not that many. I mean, I expect there are mostly going to be sort of genius software firms that created something that we all suddenly needed. You're absolutely right. If you look at it, the number of firms that actually have achieved that, that launched in 29 and have actually achieved valuations of over a billion dollars, is about 75. when you actually take out tech and tech-related companies, it narrows down to two firms. One is British and one is American. One is McGill & Partners. And believe it or not, the other firm is Skims, Kim Kardashian's business.

9:10Well, she should become a client if she's listening. I did meet the CEO of Skims actually last year, and we had a very good conversation about the progress we'd both made navigating through a pandemic and building a business entirely organically. Both run by great stars in their own infirmaments. I think both have great teams. So anyway, you've had this influx of new capital. Obviously, new capital comes in, capital goes out. What's your main priority? Obviously, this means you can get to chapter two. what's going to happen in chapter two and what are you going to do with this new investment? Well, I think the super exciting view that we have on chapter two is we're only really getting started.

9:51And when we look at the opportunity ahead of us in this business and the addressable market that we're leaning into, it is quite extraordinary. If you think about some sort of data sets and obviously, as you know, we deal more with the larger, more complex, more sophisticated clients and we do portfolio solutions for programs and MGAs and others. And we operate across the whole insurance and reinsurance spectrum. But in 2025, the non-life premiums globally is$4.8 trillion. And we've got about$3 billion of specialty premium. So it's in the category of not a lot. And if you look at Marsh and Aon, two great competitors of ours, both with their skills and capabilities, and you look at the 2025 brokerage fees of both those businesses, just those two is about$30 billion.

10:56And our 2026 revenues are north of$300 million. So again, we're actually talking about a fraction of the opportunity. And that's why I see Chapter 2 as really an opportunity to continue to accelerate our progress that we've done in Chapter 1. And so when we think about the next five years, and also I'll just weave in the partnership with EQT that we're so excited about. What I think EQT really got excited about with McGillan Partners and what we got excited about with EQT was there's a lot of commonality in the way we view the world generally. And that's particularly in the way technology and digitalization and AI is going to be really transformational as we look to the future.

11:56But also, culturally, there was quite a lot of alignment, and the relationships that we were building personally with the EQT team was phenomenal. Like Warburgs, they're growth equity investors, so their emphasis is on continued acceleration of the growth agenda and also how we can really leverage technology as a competitive advantage to continue to amplify the value propositions in terms of the way we deal with our clients and our carriers, which then drives the financial results. results. So the next five years, we see as continuation of organic revenue growth, talent acquisition, really embedding advanced tech and AI truly into the firm, and continuing to stay true to our business model.

12:55And then beginning to look at, do we actually think about very selectively expanding our geographic footprint? Well, there's loads in there. One thing, though, you could build a different culture, this business. I'm sure one of the reasons why you've been successful is because you've built that culture and you were very aware of that. I remember when you first got up at a conference and there weren't any partners yet, it was just you. You were really strong on that idea that you're going to make this the best place to work, it's going to have the best employee benefits, it's going to have equity for all the staff.

13:24For example, actually, when you're now negotiating with a new potential capital partner, knowing that you've got all the staff equity, does that change your calculus? If it was just all your shares did it change the way you had to go about things you have to do more communication well i think a couple things i'd say just going back to the start when john lloyd and i was sort of sitting down and saying well how should we think about this business we were both completely aligned on the fact that the assets of the firm are the people in it and we're only going to be successful if we can create an environment where we can attract really top quality talent with deep subject matter expertise, filter out jerks, and really importantly, make sure that our talent were prepared to work as part of a single team.

14:14And so to make sure that everything was aligned, and we're all pointing in the direction of saying, how do we bring the entire firm to our clients, which we thought would be a real differentiator. We aligned John and I very right from the start on the fact that we want an incredibly compelling colleague value proposition. We want every single person in the firm to directly or indirectly have equity, and we would pay competitive salaries and everybody would participate in one global discretionary bonus pool. That was a key driver of the success of the firm, bringing on board really high quality talent, having all the right culture around teamwork and making sure the incentives were aligned to totally reinforce it there.

15:09And then also, because we didn't have any legacy systems, just having the benefit of advanced technology and a single database. Yeah, I remember that time of the pandemic, there were plenty of brokers who didn't have laptops and they had a scrambling to make sure everybody had a laptop. I'm sure you people probably had a laptop because if you start in 2020, 2019, 2020, you're bound to have a laptop. You're going to have a small advantage there already. They had laptops before they even joined the firm. And that technology advantage in the pandemic was a significant competitive advantage for McGill & Partners.

15:44And so when I sort of look at EQT in Chapter 2, I feel, and so does John, a real obligation towards our colleagues, 620 of them, to make sure that we're making the right decisions for their future and for the next generation of leaders in the firm. And so not only did we have obviously detailed conversations with EQT, as you would expect, due diligence conversations, but they were very responsive in working with us to design an equity participation plan that was really tailor-made for the McGillan partners, the entire team. And that's super exciting. And that's unique. So there will be liquidity for some of those people who need it, obviously, because it's lovely looking at paper wealth of it, you know, then you think, actually, you know what, I've got to pay for this school fees or whatever it is, all those things.

16:39We always say school fees, don't we? But seven years is a reasonable time period to hold an investment. And so there's now an ability, presumably, for some of those employees to realize some of those gains? Well, seven years is right in the sweet spot. In fact, it's earlier than you would typically realize an event when you're a startup. Yes, you can realize an event in five years, but you're still on that J curve where there's a lot of value creation coming forward. And the really exciting development with EQT is both there's an opportunity for our colleagues to benefit from chapter one and take some money off the table but even more exciting is the opportunity to reinvest in chapter two and a very large proportion of people are reinvesting into chapter two as well as benefiting from the equity participation plan and again so they're even more sort of part of that decision making process i suppose i mean it's not as if they've got the casting vote.

17:41But again, you have to be really conscious when you've created that kind of culture that it's going to be the right sort of partner for them. The second partner is you've got to get it really right, haven't you? So it sounds like you've ticked the boxes there. We've really spent a lot of time and there are a number of very interested parties beyond EQT, world-class institutions that we were talking to. And there was a lot of alignment between us and EQT. And it's super important, as you know, Mark, when you're a people business, it's important you do your very best to get it right. And I think we've just got for our colleagues an incredible future ahead of us.

18:20And there's a real distinction when every colleague is an owner of a business and is helping continue to build a business. I think people in McGillan partners are very proud, rightly, of what they've accomplished because it's quite extraordinary. And they're really excited about what the future looks like. Well, you mentioned about the very big two there, you know, 30 billion, is it between them? Yes. 300 million to 30 billion. Their ceiling has got to be a bit higher than yours because they're everywhere doing everything in retail and you're more selective. What sort of ceiling do you think you've got?

18:58Or where could you be? Where would you be targeting this five-year period? We can see revenue growth continuing to grow in the high double digits organically over the next five years. And if you think about high double digits, you can think about our revenue more than doubling comfortably over that period of time. And continuing to obviously retain our talent is important, but continuing to attract high quality talent is super important. and we're sticking to a very focused model which is around specialization. The center of gravity of our business is around structuring, designing and placing world-class insurance and reinsurance solutions for our clients.

19:46We're really proud of what we do and we're proud of what we don't do and so we do our best to stay disciplined and focused. I suppose it's something that's got to be big enough where you can apply those large-ish numbers and really analyze the numbers and prove that you're smart rather than doing one thing at a time. A massive global aircraft manufacturer is going to be as complex as any treaty, isn't it? Is that the way of defining what you're doing? Is it, you know, if you're sort of something where it's sort of almost treaty-like, even if it's a facultative individual placement? Well, some of it.

20:17I mean, we're privileged today to handle over 50 of the Fortune Global 500 clients. And we're very discreet, we're very understated, And of course, you're not doing everything with them, are you? No. You're doing the bit that you want to do. We typically start off with a specific product line, and then we refer to it as client density. We broaden the relationship over time, and it normally gets deeper with our clients. In fact, when we start with a single product in year one, typically by year three, we will have broadened our relationship quite profoundly so that they're getting three to five different solutions per client from us, which speaks to the single profit center philosophy and the teamwork.

21:04So you can cross-sell because people are happy to, because it's benefiting them just as much as it is the other person. The vast majority of our growth is what you would consider cross-sell. So just to clear this up on the second chapter, it sounds like it's all still growth. Sometimes now you're maturing, you might say, oh, actually, we need to look at margins expansion as well. But that's not the message I'm getting from you. It sounds like top line, there's still so much more territory to conquer. Well, the margin expansion has been coming through now for a couple of years. And it's coming through naturally.

21:34We're super focused on not just the top line, but the bottom line as well. And so we see continued progression in terms of margin as we look out to the next five years. Do you think that's the byproduct of doing everything right at the front end rather than the be-all and end-all? I think it's a byproduct of actually driving organic revenue growth that's in the double digits. I think when we look out over the next five years, it's a byproduct of also leveraging our technology and AI to drive more productivity. And that's clearly most firms in the world, but in the insurance ecosystem are very focused on that.

22:15And I think that's a home run for most of us. And I think we've always just been as a firm, very disciplined in recognizing that what we're building is almost like an elite sort of special forces capability and staying focused and making sure this is a high performance culture. And unfortunately, some colleagues, you can't always get absolutely spot on. And if it isn't working, you've got to make the decisions to move on that and really concentrate on reinforcing and amplifying the high quality talent that we have in the firm and then bringing in new talent. And I suppose you're already naturally focused on the segments of insurance and reinsurance that are higher margin anyway.

22:59Yes. You're not in the lower margin area and you leaving that to others? No, and I think generally when you go up into the more sophisticated clients, the more complex clients, the more challenging risks, that's where you see the value creation becoming very apparent. And I think that's where you see clients who are prepared to recognize and pay for the value. We're not in the commodity world of insurance. We're at the other end of the spectrum. Obviously, your growth up to now has been completely organic by talent acquisition. I saw a report somewhere said that more traditional acquisitions might become part of the armory now.

23:38Under what sort of circumstances might that be? Or one, were you misreported? I don't know. Our focus and our five-year plan with EQT is entirely organic. There is no plan to do any large-scale M &A. The beauty of our position, though, is we're partnering with a firm in EQT that have deep pockets. And if we needed to pivot and together we saw an opportunity that could accelerate our progress, we could move on that pretty quickly. But that is not part of the plan. I suppose now with 620 colleagues, if you see something that's another specialist boutique that you admire the culture of and you think this could be part of their succession planning, think, well, if we sold into this organisation, it would be a really good way of maybe, you know, the founder stepping away and then the succession, and those people coming thinking this is a great place for them to come.

24:33But if that's a 20 or 30 employee business, I suppose the cultural risk for you, the execution risk is very low. So they will become a McGill business rather than you becoming one of them and having that risk. If it was year two and you were buying something, then almost you could have imported their culture and that wouldn't have been what you wanted. Yeah, I think just on succession, first of all, we've just got a phenomenal array of talented professionals in the firm. When I look at our journey over Chapter 2 and the next five years, there's no issue, in my opinion, with succession plan, whether it's for me or for other clients.

25:07I was just thinking, you as an acquirer, often the reason why you get the opportunity to acquire is because it's a succession issue, i.e. the founder maybe wants to step away. I'm not planning to step away any time soon. No, no, no. I mean, not talking about you, I was saying you as a potential acquirer, i.e. the person that you're acquiring might be the person who's stepping away in their business, in a small business often. Oh, I see. You as a buyer. So it gives you those opportunities. And of course, part of being a good buyer is, of course, being seen as a great home. You know, a lot of those businesses, they've got a lot of personal investment in those businesses.

25:37And if they've done well, they really care about those other people in that business. And they want to make sure it goes somewhere good where the opportunity is going to be just as good as if they'd stayed an independent business, for example. and presume something like what you've built here is a lot of people would look as being a good home yeah i think the culture we've created though is pretty unique and the way we compensate our colleagues is unprecedented in the industry and so i think our ability to do bolt-on acquisitions is certainly possible you know it's not necessarily the plan but you could be opportunistic if the right opportunities came along and someone said hey well steve actually look i'm thinking of stepping away i've got this fantastic you know we've got a great business we're always competing with each other half the time anyway and you're saying oh actually that's really interesting you've got this great specialism and niche and and they've got the right culture and you think yeah actually this could be really good and it wouldn't be hard to do i can only think of a very small number of firms that would fit the description but you know so that's good well then that's only a small number of things to worry about then yeah but i don't see large-scale m &a for us on the landscape it's not in the plan for the next five years you can never say never because what i do feel is the structural change in the broking industry is going to continue at quite a pace over the next five years.

26:54And the dynamics of the broking industry, I think, are going to change quite profoundly. And I think there's, like with anything, there's going to be winners and losers. And so that structural change may open up opportunities to do a transaction. But more likely, in my opinion, that structural change will open up opportunities to amplify our business of talent acquisition only. Yeah, because those staff might be attracted. Yeah. Your mission is to make them gravitate towards you anyway and naturally sort of be the magnet that's pulling them towards you anyway. Correct. Particularly when they can see that some of their own businesses, if they're not the winners, and they're the good part of a business that overall is not winning, there's plenty of great people in those businesses.

27:36And that's often the case. They can see, well, actually, I need to jump over here because this is where it's going. Otherwise, in terms of a more generic question about growth in the world, where are you happiest at the moment and where might we see you expand a little bit more? I mean, it's not flag planting, but more places where you might want to open an office or have representation. As we know, it's still incredibly important to be close to people. People still like people, don't they? Yeah, people like people. Relationships remain incredibly important. We see the opportunities, first of all, in our heartland here in London, in Dublin, and in the US.

28:13I think the opportunities for us to continue to pursue our successful strategy are enormous. And so we're really, really excited about that. And that remains our priority. Having said that, when we look at the world, notwithstanding what's happening in the Middle East, I think if we were able to find the right talent, we would absolutely be interested in building a center of excellence in the Middle East, probably out of Dubai. We'd be very interested in building a center of excellence in Latin America, Brazil, and we'd be very interested in building a center of excellence in Singapore. But we won't make any decisions on that unless we can find world-class talent that will fit our culture, that we'll be able to see this coming into the firm as a win-win situation.

29:10But those areas, I fully expect in Chapter 2, when you get to the end of Chapter 2, when you get to 2030, I wouldn't be at all surprised if you will have seen us having positions in either the Middle East, Latin America, or Singapore based on getting talent, or hopefully all of them. Good. So things that make a lot of those kind of global hubs for the kind of business that you're after. Yeah, and that doesn't exclude some other geographies. It's largely dependent on talent, it's dependent on specialization, and it's dependent on does the type of business fit with the core strategy of McGill and Ponds.

29:52Excellent. Well, I'm really glad I'm talking to you because you're a pioneer of all this, what I'm about to ask you about. We're sitting in the world now, you know, we're sitting in London, capital of syndicated risk, and everything's changed so much. And you were the ones who started. It was over 15 years ago. I remember I was working at the Insurance Society then, and we had the big story. You were one of the main investigators, but that was an end-client treaty, which of course has now matured and actually has come through a whole cycle of a very soft market, come through that, and come through a very hard market.

30:20And now we're softening again. So we can say that it's done a whole cycle. We could now say it's going to be a permanent feature of the way things are going. We're digitizing, facilitizing, there's algorithmic underwriting here. We've got algorithmic syndicate, Lloyds, Smart Follow, Smart Consortium, all these things. They're all very much part of the same thing. And it's something that you push that first sort of bit of snowball down the hill and it's a big snowball now. It's getting near the bottom of the valley and everyone can see it coming. I mean, you kind of started a lot of this? Where are we now?

30:50And how are you positioning the business? And you've kind of hinted at this already earlier. Well, I think the first material development that you're describing was actually in March of 2013. So it was 13 years ago. And it was when I was privileged to be president of Aon. And it was the very first one was the Aon Berkshire sidecar, which was a transaction that I had negotiated with Ajit Jain. And if you remember, it was almost filled with shock horror. You were not the most popular person in the world at the time. No, and it was interesting because when we launched it, we were making really important points.

31:36This is good for clients. It's good for Lloyd's and it's good for the London market. and there were lots of people who just didn't see that, didn't understand it. And it turned out it was good for clients. It was good for Lloyd's. It was good for the London market. That Aon Berkshire sidecar morphed into the Aon Client Treaty. And that theme, in my opinion, has continued with the Aon Client Treaty, which is obviously a hugely successful facility. And we've, as you know, launched Auton, which we did in late 2024. And facilitization has been quite an important thing. I'll come back to the partnership with AIG that is the next generation of fast follow.

32:29But I think when you step back and just look at everything that's happening in London, as you described it, you know, there's fast follow capacity. there's various stages of digitization there's syndicates like key that was also launched in 2020 that have been very forward-thinking and algorithmic underwriting and there's all the questions about leadership which remains critically important to the health of the market here and also how do you efficiently harness follow capacity yeah when i step back and look at all of that just before thinking about McGill & Partners. I think this is all incredibly exciting because I see it as dramatically enhancing the value proposition of the London market and Lloyds for the benefit of everybody and most importantly our clients.

33:26Now, not everybody's going to get it right and some facilities maybe are not as professional as others. Some don't have the quality of data. Some will work, some won't. But I think the direction of travel for syndication of risk for London and Lloyd's is incredibly positive. And I think it's going to be a huge driver of growth in this market over the next five years. Yeah. We can almost see a time now, but as I had Clyde Bernstein, who's now at Aon, we've got the situation where leaders are enhancing their position because they've got smart consortia behind them. Obviously, the broker placing, that business has got their ought on their client treaty or whatever they've got, and that's taking a significant share.

34:12So it's leaving a bit of a squeeze middle there for a traditional manual follow market, when you and I were wandering around the market, getting people to actually put lines down on slips. Those were the days. Absolutely. I mean, you used to get more fresh air then. but it was frustrating and then we had to queue up and it wasn't as efficient as it really should have been. Do you think particularly as some of the brokers are now trying to digitize that middle part, they follow the bit that they haven't already automated, the lead is automating a lot more and becoming bigger and probably getting a bigger line because of the capacity they're lining up behind themselves, will we end up with almost leader only?

34:43I think the market is going to find its own level. And I think how you define leader only could be a bit nuanced because often And with sophisticated clients, you have lead underwriters competing for a major risk. Yeah. A leader wins it. Another high quality market nearly won it. So they're offered it. They're offered it. So I think it's going to be, certainly for the more sophisticated clients, it's going to be more nuanced. But do I feel it's in the best interest of clients to have our brokers walking around the market or sending emails trying to harness capacity where it takes weeks. And as you know, when you were in the industry like I was back in the dim and distant past, you know, when I started, there were over 400 Lloyd syndicates.

35:36Yeah. And you might get a lead line of 5 % that rapidly goes down to two and a half and you'd walk around and you'd stand in line. or me as a junior broker, I might be standing in the queue, saving a space for the senior broker to come in and take my place. And sometimes you'd be queuing for hours in extreme cases. Sometimes you'd have to come back the next day and - Make a list, wasn't it? Make a list and having queued all day. Now, that was the extreme sort of 30 years ago. Thankfully, a lot of that is gone. But I think in today's world, what I think clients want is they want certainty of capacity quickly, and they want to know that they've got competitive solutions from high-quality leads, well thought out, and they still want to be the driving force behind certainly the main capacity, which is the lead capacity, and possibly one or two other players.

36:35and then the rest of it should be as automated as possible. And to give you just an extreme example of the importance of speed, one of our major clients had a vessel and shipment parked up in the Straits of Hormuz. It was a Friday afternoon. This was a few months ago. And the client called us and said, we need a quote for going through the strait wall cover. and the war cover, the quotes, you probably know this, are typically only open six hours. Yeah. So you've got six hours, you've got a lead quote, you then need to get it renegotiated. They came back to us at four o 'clock and said, we need a quote now and we need it bound in 10 minutes and we're basically going dark.

37:27We've got the American Navy right next to us. They're going to take us through the strait. We need it done. And our exceptional team, led by David Smith, managed to get the capacity put together in 10 minutes. And what made that possible was the fact that we could access the fast-follow capabilities, particularly the Auton facility that we had in Lloyds. And we literally went back in 10 minutes and said, done. interestingly the captain came back and said I'm not leaving until I've got a McGillan partner's certificate of insurance and then had to get it over which was done in a few minutes and they had everything start to finish 15 minutes and they went through the straight the client was absolutely ecstatic about that level of service and whilst that's a very extreme example I think when I look at the future, I think it's all about high quality carriers leveraging their position as technical lead underwriters.

38:39And also really importantly, and this is something we're going to be pushing hard as a firm going forward, carriers have got extraordinary additional capabilities, you know, services, whether it's risk engineering, whether it's cyber consulting, There's lots of other capabilities that they have that we want to get fully in front of the clients because quite often the value proposition of high quality carriers doesn't come through. Yeah. And I think when you break out the market and enable our brokers to start focusing more on high quality lead underwriters and really understanding their capabilities beyond just putting out capacity, I think that's going to be beneficial for our clients and beneficial for those leaders.

39:28I suppose just those leaders that's competing, they're going to say, well, you know, why should I deserve to be lead? Well, because I have way better understanding of the risk and I've got great capacity behind me, but also I have even better services. So yeah, you know, as soon as you join my team, I'm going to send my engineer down who's going to, you know, stop me having losses in the first place. Well, I think we want to bring to life the value proposition of the carrier and have that as part of a thoughtful decision-making situation with the client so they can really understand beyond just pricing and coverage the breadth of capability that they can get from high quality lead underwriters.

40:06Back in the old days saying, you know, 1980s, 1990s, a facility, we'd say, well, it's managed by a broker, it's going to be fine in the soft market and then eventually it'll just fall by the wayside when the market hardens because it has not made under us a lot of money. These days, when I talk to a broker about their facility, it seems the arguments change completely. The alignment with the under-isers seems to be there. And of course, we just had a discussion about client treaties come through a full market cycle. So it must have worked because it's come right through the other side. And so the broker would say, well, a facility can't burn in the way that it would have done in the 80s and 90s and sort of fall by the wayside because it's a fundamentally important part of my business.

40:42It's a pillar of my business. Because if it's not there, I can't do my job in the same way. You couldn't do that straight-of-all-mooze thing if your auto had been underpricing risk. Do you think it makes you more aligned with underwriters, ultimately, that it can't be unsustainable because it's too important for your business? Well, there's a couple of things I'd say. First of all, as brokers, our obligations are to act in the best interest of our clients, and we never forget that obligation. And I suppose long-term underpricing risk is not in the interest of the client either, because the market won't be there.

41:13No, it isn't. But I think when I think about the transaction we were privileged to do in partnership with AIG, which was announced in March, effectively, I would regard that as one of the most sophisticated underwriting transactions that I've ever been involved in in my entire career. This was not blind fast follow. This was truly and actually taking our entire specialty book and underwriting the business across 41 different specialty lines, you know, a couple billion dollars of premium. and we had incredible data. We had loss information. And so what we were doing was basically saying, this is not a traditional blind, what some people might think is blind, fast following.

42:05Because you might say, well, yeah, because it doesn't matter because it's already got such unbelievable diversification with 41 uncorrelating classes. You said, do you really even need to underwrite it? Well, it sounds like you've got the answer to that. It sounds like you can almost underwrite every individual risk that is comprised. Yeah, I mean, AIG effectively think of it as a portfolio leader of a portfolio solution. And they underwrote the whole thing. We developed customized dashboard for AIG so that all the risks that have been bound, they're seeing real time. It's got all the information.

42:38It's got all the accumulations. We've got feeds from Moody's going into the dashboards. It is unlike anything else that is out there in the market. and it's extremely client-centric. And the other important dynamic when you were talking about cycles is a core part of the AIG transaction, which can write up to 25 % of significant capacity across all the different lines. A core part of it is that clients that come through us get access to rolling five-year capacity from AIG. it's not absolutely guaranteed capacity but it's a strong five-year commitment so it's almost like a tracking each year if if there's a renewal and you've got a different lead yep that capacity from arg is pretty much there and i suppose they've got that dashboard and i suppose they've got that ability to move if things are all flashing red on the dashboard well you know then they've got all that data they can ingest everything they have they've got their own view of that risk and if everything starts flashing red then you're going to get a warning you're going to say come on guys yeah you can this is not going to be sustainable is it real time adapt the portfolio and we embed their risk appetite into our technology because they can change their appetite yeah that was one of the things i suppose if people are worried about effectively you know we've got big leaders lots of facilities following someone would say well what about a fat finger error you know what if they just get the decimal place in the wrong place it seems like to me they'd be pretty quickly picked up because it's not as if these are blind to follow.

44:13This is technological follow that is really underwriting. And it's doing the job all the follow markets used to do to say, well, don't you think he's, you know, he had a bit of a rush of blood to the head, didn't he? I mean, we know Dave's a really good leader and he knows everything, but I think he's got this one wrong. You know, you get that moment when you're a broker and you think, this is great, I'm definitely going to have a firm order on this. And then the follow market is just not going to follow it because there was a mistake made, it was too cheap, but it couldn't be completed at that price.

44:37Do you think that the market's going to be self-correcting, i.e. if the leader does have a rush of blood, it'll probably be picked up pretty quickly. Yeah, I think from our standpoint, with the way we operate our business with Auton and with Galileo, the AIG transaction, most of the market are just providing border roads that shows what's happening 60, 90 days after the event. And this is a real time. This is a real navigation till they can really see what's happening. And so if you had a situation where a leader was writing Florida windstorm and suddenly there was this business appearing, that's getting picked up real time and can be addressed as opposed to you're seeing it in a border of 60 or 90 days.

45:20And they've got all the aggregation, so everything's there. Everything's tracked. That's why I describe it as next generation. It is incredibly sophisticated. It actually takes the data that we have and the technology that we have and the expertise of a world-class underwrite like ARG, and it puts it all together. And recognizing our obligations to our clients, we do view this as a strategic collaboration of significance. And from that platform, we're thinking, as you look at the advancement of everything in the market, we now have a number of conversations going on with really high quality, I'd call it cornerstone capacity, that is either fully on a digital journey or partially on a digital journey or wants to explore writing portfolios or wants to do algorithmic underwriting.

46:16And we're lucky enough as a firm to be able to cater for the full range of experiences that a carrier might want, including where they're saying, we've still got to effectively underwrite each risk kind of manually, risk by risk. And in that extreme, we can still take their risk appetite, embed it in our system, direct business to them that's within their risk appetite, even if they're underwriting it account by account, whilst they're then thinking about how do we go on this digital journey. But I think what I would say is without exception, I don't think in the market there are underwriters who've got their heads in the sand.

47:00They're all looking at the market evolving, and they're all working out, how do I play? I don't think it's going to be as simple as there's lead and then there's automatic capacity for everything or one facility. I think it's going to be a lot more nuanced, and there's going to be market factors coming into play. But as I said earlier, when you step back and say, what is this trend all about? I see this as one of the most exciting developments for the London subscription market and an ability for all the brokers in London and the underwriters to harness capacity effectively and really focus on delivering the best possible solutions to clients.

47:49It certainly just makes London more relevant if it's a four-minute question of placing my war risk. And with a certificate, the cover note and everything, that's pretty amazing because that's not what it used to be. And again, with the sort of capacity you could spin up very big limits again. Yeah, but I think risks are, as you know, becoming more complex and more challenging. And I think brokers and lead underwriters need to spend quality time crafting and customizing the right solutions, which is a skill that exists in Lloyd's and the London market that doesn't, in the way it's being done here, the syndicated market, it just doesn't exist anywhere else in the world.

48:30And anything we can do to reinforce it in a way that's client-centric, I think is super exciting. And of course, it's a virtuous circle there because with the technology, it should be freeing them up to spend that quality time doing the actual added value stuff, whereas they're not doing all the admin and not swimming in bits of paper anymore or just working out where they are half the time. And now they know where they are and they know exactly what the problems are and they can start working on solving the problems, which is actually where everyone gets paid. Yeah. And you're at the more interesting, fun end of the spectrum, the intellectual capital end of the spectrum.

49:03And we haven't talked much about AI, but that is going to also transform the experiences of both brokers and underwriters in very profound ways over the next five years. Well, I'm definitely going to talk about that just now. But before we do, actually, what about the reshare syndicate phenomenon, Lloyds? It seems to be all part of the same thing. I mean, reinsurance captive syndicates, a way of large global insurers to buy, and not so large, to buy reinsurance in a more efficient way, or bringing in new forms of capital. For one, do you think that new capital is genuinely new and different, and therefore good because it's a great diversificator for everybody.

49:41These are Lloyd syndicates that have built for the purpose of buying reinsurance on behalf of their own. And there's the recent example with Aon and Blackstone. Yeah. One of them is broker-led, obviously, so I'm sure if you were still at Aon, it would have been one of your ideas, Steve. It's interesting, eyebrows have been raised, and it reminded me of you back in 2013, sort of not on everyone's Christmas card list that year because of what you've done. We've got a similar sort of story playing out in the reinsurance community. Love to hear your view on that development. It seems like another little nuanced flavor of what is part of the same thing.

50:11Is some of that new capital, is that genuinely new capital that's coming in it, or is it just coming in a slightly different way? Well, I think, again, this is a market, and I think this is an opportunity for capital to come in and add value. And I think Lloyd's quite rightly are embracing this opportunity, but putting guardrails around it. Yeah. I don't know all the ins and outs of this, but my sort of superficial view when I look at it from the outside is it's almost a reinsurance equivalent of fast follow and almost a reinsurance equivalent of what I had started with the team in Aon in 2013 with the Aon Berkshire sidecar.

50:54There's some noise around it. I'm a bit puzzled, to be honest, because if I'm not mistaken, I do recall many years ago, Chubb actually developed a reinsurance solution with BlackRock. Now, it wasn't done through Lloyds, but it was taking a share of their treaties. It's very public and I think was a very successful transaction. It's not all new, is it? No, it's not necessarily new. And I think it's just part of the market continuing to innovate. And what I do believe is third-party capital, there's going to be a significant amount of third-party capital coming into the London market and into Lloyds over the next three to five years.

51:43And I think it's going to be measured in billions. And again, I think properly harnessed, it's going to be a good thing for the market. If you remember, just on the reinsurance side, Lloyd's share of treaty reinsurance is minute. And I think some of the announcements that are coming out are going to enable Lloyd's to write more treaty reinsurance business that I think adds to the expertise of Lloyd's market and provides a bit more diversification. And the cost of doing business at Lloyd's, ultimately, if the platform was being used more than those fixed costs, they become a lower percentage of everything, and everything becomes more efficient, and then, again, becomes a virtuous circle.

52:29And if you've got the best solutions, you've got the ability to bind a risk in four or five minutes, why wouldn't you come? Why wouldn't you press that button and send it to London just to see what could London offer me? They might offer me something much better than I can get locally. It seems like there's no reason why the London market couldn't grow faster and increase its market share of the world in most markets. Correct. And not only grow the top line, but grow the bottom line. And having a strong market here is, I think, really important because the challenges clients are going to face out into the future that we're already seeing, supply chain risks, data centers, the implications of some of the big tech firms, the capacity that's required, the construction that is going on around the world, the challenges in the Middle East.

53:15I mean, climate as well, climate cap losses. I know it's maybe a bit better this year, but they're trending over 100 billion. It just scares the hell out of me. When you have no hurricanes until October or late September, it just makes you think, OK, this is what it looks like when the El Nino is very strong. What about when you have La Nina with 47 hurricanes? Yeah. We sort of know that whatever it is, if it's out of balance one way, it's like it should be out of balance the other, isn't it? Yeah. But when I last looked, earthquakes aren't seasonal. No. So who knows what's going to happen? them prepare for the unexpected absolutely so another thing is what you already mentioned before about one of the big strings on your bow is providing a lot of capital for mgas and that hybrid carrier market that was a fantastic good timing again with you the last seven years that's been a really great growth engine for you because it's been a secular trend that the tiger you're able to grab by the tail again now the market's turned do you think are we going to have a bit of an ebb and flow there it seems like it is a secular trend like a permanent change in the way things are happening, the way that the insurance distribution chain is assembled.

54:18But do you think we might have a bit of a tempering of some of that growth? I think the MGA market is here to stay. I think whether it's on the broking side, the MGA side or the underwriting side, you're inevitably going to have market dynamics that result in some of these firms coming out as winners and some of them actually not being successful. And I think in the case of MGAs, what's clearly super important is the way the MGA is aligned with their capital provider. And there seems to me to be really well thought out MGAs, well structured, where there's very strong alignment between the capital provider and the MGA.

55:04And I think that bodes well for the future. And then I think there are other MGAs and what I'd put fronting companies in there where the alignment is more nuanced. And I think that's where there could be challenges. And a soft market is not very forgiving. And Evan Greenberg, who you've got to recognize as one of the truly great leaders in the insurance industry, does talk about this a fair bit publicly. But But I think whichever part of the industry you're in, including broking, you've got to stay true to your cause and stay disciplined. And it's highly, highly relevant when you've got the pen and you're underwriting, whether you're an MGA or you're an underage, whether a lead or a follow.

55:55And I think the soft market is going to, over time, flush out the winners and the losers. and not only that, I think it's going to be amplified by those firms that aren't embracing advanced technology and AI. That's going to be an added level of complexity. I suppose that's what happens all soft markets. Always the Buffettism, isn't it? We'll find out who's swimming naked when the tide goes out. The tide's going out, so we'll find out. And obviously those who are doing really well will be fine. I'm sure they'll probably thrive. and deserve to be fine and deserve to thrive. Yes. So AI, I mean, it's a great time to be talking about AI because it's the sort of thing that I've had to add to my list of questions because we could not talk about it.

56:40But now we can have a more mature conversation about it because two years ago you could say, well, we're just playing around with it and seeing what happens. And now you can say, well, we definitely have played around with it. So you've done all the experiment with AI. Where have you found the best use cases and where are you embedding it most into the business? The way we look at AI is we're looking at it as an integral part of our business, literally all the way through the life cycle of a client that we're dealing with. And we're not just looking at it as how do we think about being more productive and how do we think about using AI internally to drive productivity.

57:18we're looking at how do we use advanced technology and AI and also data to actually differentiate our value proposition with our clients and with the way we work with carriers. Last week, I was in Silicon Valley with our leadership team, and we had incredible meetings with three of the out-and-out leaders, Anthropic. We were at Google and Google X, their innovation lab, and also we spent time with Salesforce. And you don't get a sense of how transformational AI is going to be, in my opinion, until you actually physically go and spend some time in Silicon Valley and talked to some of these world-class tech firms.

58:15And the takeaway from my standpoint is a couple of things. One is you shouldn't think about the sort of AI journey measured in years. You should think about it measured in months. Things are happening at such an extraordinary pace. It is quite unbelievable. And I mean, to just give you a data point, Our team went into the Anthropic head office last Tuesday morning, and we were meeting with some of the senior team from Anthropic, which was in itself actually really fascinating. As we're walking into the reception, it was incredibly busy, not only because Dario, the CEO, was appearing with his security team, but they were actually onboarding 140 colleagues, new joiners to Anthropic, which they do every Tuesday.

59:12And every Tuesday, they're onboarding, just in the San Francisco office, over 100 people each Tuesday. The Anthropic revenues in 2025 were below$10 billion. The run rate revenues of Anthropic by the end of 26, so this is run rate going into 27, is going to be north of$100 billion. So less than 10 for 2025, over 100 billion run rate by the end of 26. It is the fastest growing firm in history, and they're selling stuff to somebody. And so our view as we came back was, this is real. You cannot afford to ignore it. it is going to be extraordinarily effective in every aspect of what we're doing. And you should start thinking about fully embracing it now and not thinking about, let's do just a little project on the side of a desk and superficially embracing it.

1:00:30When I talk to the techie people, which I do, you have to redefine the architecture of your business and make sure that the data is right at the heart of it. Because if the data is no good, you can't really do anything. Yeah, the data needs to be in good shape and your systems, legacy systems, ideally need to be in pretty good shape. But I wouldn't use that if you haven't got that as excuses for not actually embracing it. What about on the risk side? You know, when you're talking to Anthropic, obviously, you know, you're an insurance broker. What can the insurance industry offer a business like Anthropic?

1:01:03Could be a classic moment with the insurance industry misses that opportunity or misses it early because we haven't really got anything. If your revenues are 100 billion, you say, well, actually, okay, we can manage a captive for you. But what else can we do? Because we've got more capital than we have. What about, for example, AI as an emerging casualty peril? There's a bit of a debate going on about that. And certainly my more recent episodes have had that debate with people. What's your view? Some people say, well, it might be the new cyber. So for example, of course, you're a great entrepreneur.

1:01:30If you saw it as the next cyber, he wants to jump on it well i think it's it is a rapidly evolving picture and i'm at the moment just watching it from the sidelines to see how it develops and there are views as to whether it should be completely separated out and separated out from cyber as a standalone peril and there are other views in the market that are different. But it'll happen organically. We'll soon know. And it sounds like, at least with this, we won't have to wait very long. No. I think, again, you know, when I just said earlier, with our industry, prepare for the unexpected, I think the transformation of business generally and the risk on the downside, The cyber risks now from these cyber criminals aided by AI, the severity and the frequency of attacks, the potential severity is going up and the frequency of attacks is going up exponentially right now.

1:02:40So I think the exposures need to be very carefully assessed. And I'm sure all our underwriting friends are very actively analyzing that as we speak, because it is moving at such a pace. My last question would be, what about you, Steve? You know, you've come through this. We're talking about chapter two of this business, but I don't know how many chapters you'd say in your whole career to date, but it's not two. It's more than two. How are you feeling about everything? You look really well. You don't seem to age, which is good. So starting your business keeps you young, it looks like. You know, are you sort of ready?

1:03:12You signed up for the next how long? Well, I said to my colleagues, we have an owners gathering that we did in early June this year, obviously before the announcement of the EQT transaction. And for a whole host of reasons, the position we have in the market, the size of the opportunity ahead of us, what we consider is the fourth industrial revolution, which is AI, the way The subscription market is evolving, in my opinion, in a very positive way, led by Lloyd's. The opportunities we have geographically. I said to my colleagues that I see the next five years as the most exciting period of my entire career.

1:03:57And I really believe that. So I'm fully committed to Chapter 2 with EQT. I'm very aligned with EQT and our team around the future. And I just think it's a really exciting time to be in this industry, in this business, in Broking and in McGillan Partners. And it's a great privilege for me to be leading such an exceptional firm with such an exceptional team. Well, Steve, I'm very privileged because I'd get to sort of spectate on the sidelines. And I agree with you. It's really exciting. So thanks so much for giving up so much of your valuable time. I've really enjoyed talking to you. And yes, let's do it again.

1:04:36Pleasure. Take care. Well, I hope you enjoyed today's episode. If you did, don't forget to subscribe or leave a like or a review or recommendation on whatever podcast platform you used to access this program. These really help get the word out. Before we go, just a quick reminder that advertising slots are available here and in other places in the Voice of Insurance podcasts. Podcasting is the fastest growing medium and attracts a high quality audience of key decision makers. It's also an intimate medium where you, the listener, are right in the room with me and the interview subjects. Needless to say, that means it's a great way of getting your message out directly to an audience because you know you've got their full attention.

1:05:17It's also very cost effective. So get in touch with Mark at thevoiceofinsurance.com to find out how you could be speaking directly to the industry. The Voice of Insurance is produced in association with Advantage Go. So release your underwriters to underwrite with Advantage Go's underwriting platform.