With the resources of a global organization behind him, Willis Canada's Jack Mazakian navigates today's difficult market for financial institutions coverage
Throughout his career in the insurance industry, Jack Mazakian has continuously pushed himself into new areas that have tested his abilities to the utmost. The pattern was set during his early years at AIG when, despite having little training or experience for the job, he moved from the accounting department into underwriting because he thought that underwriters were having more fun. “I wanted to be overwhelmed so that I could see if I could swim out of it,” he says about the experience.
His tendency to face adversity head-on is an important asset to him these days. As executive vice president and leader for the regional financial institutions practice at Willis Canada, Mazakian has had to navigate through the stormy and uncharted seas of a tumultuous insurance market for this niche since the beginning of the credit crisis in 2008. The challenges he has faced over the last two years in making sure his clients still have the protection they need, at terms and conditions they can afford, offer some instructive examples of how forces from around the globe are having a huge impact on domestic insurance markets.
Since his underwriting days, Mazakian has been a specialist in professional liability for financial institutions. From AIG, he moved into brokering at Marsh FINPRO where he continued to “major” in errors and omissions (E&O) liability, while gaining an introduction into the other key lines for financial institutions. He then moved on to Johnson and Higgins (J&H) where he gained experience with a broad range of lines for varied commercial interests.
After Marsh bought Johnson and Higgins in 1997, Mazakian and five others (mostly ex-J&H people) started the brokerage of Jones Brown. The experience of building up the business from scratch was critical in helping him understand the perspective of many of his commercial clients.
“When you walk into a CFO’s or CEO’s office, especially as an entrepreneur who’s been extremely successful, you know what they’ve been through. You know the battles that you go through in trying to rely on cash flow, but you’re also stretching a lot of things.”
This is what clients have the biggest difficulty with, what keeps them up at night; their malpractice exposure.
Eventually, however, Mazakian came up against the next barrier he wanted to push through.
“When I was at Jones Brown, one common theme that was coming to the surface (for bigger accounts) was, ‘we like you, we like what you presented, but we’re concerned about the depth of your resources.'”
To move up to the next tier of large commercial accounts–multinational companies with large and complex risks in many jurisdictions–Mazakian decided he needed to move to an even larger and more established brokerage. In 2004, the opportunity presented itself when Willis Canada came calling.
“When I came, there was no dedication in the financial institution space, so I started that from scratch. We have a very strong and robust business in the financial institutions area now, and we continue to grow that in a number of different arenas, both from a risk management perspective and also from a program basis.” E&O liability continues to be the major portion of financial institutions business that he deals with. “This is what clients have the biggest difficulty with, what keeps them up at night; their malpractice exposure.”
According to Mazakian, the advantage a firm like Willis offers that enables him to work effectively with top-tier international clients is the organization’s strong supporting cast. No longer does he have to be the star of the show.
“It’s a different approach, rather than being one guy who did everything–that’s what the smaller brokers do and that’s what I used to do–to saying ‘let me bring in the right resources to get things done.'”
Those resources include a claims management group that supports and advocates for clients during the claims process, and resource centres for product knowledge and product development.
“It gives a new dimension to the relationship of an insurance broker, because not only do you have to keep close with your clients and your underwriters to make sure that you understand the flow of the business, but you also have to have close relationships with your resources, so that when you call they don’t say ‘Jack who?'”
Mazakian’s relationship management extends to Willis’s C-suite as well.
“It’s empowering to be able to walk into a client’s office and be able to say that not only do my worldwide CEO and North American CEO know me, but they support me. That is powerful and effective, and it’s different from where we were at Jones Brown or my past, where a lot of the risks were on my shoulders.”
Having those resources available to him has been critical ever since world financial markets imploded two years ago. Not surprisingly, the credit crisis has made it much more difficult for financial institutions to secure coverage in what Mazakian calls the “holy trinity” of lines that virtually all financial institutions require: E&O, D&O and bond. Almost overnight, many of the UK-based underwriters that Mazakian and his team rely on for placements changed their attitude toward risk.
“I was in London in October 2008 and I saw how [the underwriters] had very quickly started to reorganize their portfolios and identify where their stress points were. That’s a very cryptic way of saying they were moving away from risk, walking away from clients, saying I can’t take the risk.”
Rates went up, coverage was reduced and some underwriters turned away completely from certain classes of financial services business. What’s more, these problems were very isolated to this sector.
“While we went through a lot of these issues internationally and locally in the financial services business, the commercial market continued to be aggressive and prices continued to come down. We thought that it would spill over but it never did.”
The shrinking market meant that Mazakian had to move some placements back into Canada with domestic underwriters. However, the more conservative attitude to risk and regulation that defines the Canadian financial markets and has made them the envy of the world during the tenuous economic recovery presented challenges for Mazakian and his clients.
Each region in the US has a problem in itself that causes unique dilemmas.
“The problem we had with the domestic underwriters is that they are not as willing to negotiate aspects of the policy that the London underwriters would. The clients that had to stay saw significant increases, and in some cases very onerous conditions.”
Another niche Mazakian specializes in within the financial services sector is mortgage impairment products. This market has also witnessed radical changes in recent years.
“There were only a few insurance companies that were willing to provide this coverage anyway. That’s become more acute in that no one is willing to jump into a market that is now seeing a huge amount of volume.”
According to Mazakian, total premium spend in this area has increased anywhere from 50 to 75% for some institutions as repossessions remain high and the banks scramble to protect vulnerable mortgage assets. Consequently, rates have also increased from 20 to 25%. As Canadian banks move into the US to buy up these distressed assets, their exposures in the US are expanding significantly, leading to vigorous exchanges between brokers and insurers about the value and risk associated with the properties.
“Each region in the US has a problem in itself that causes unique dilemmas,” such as earthquakes in California, flood plains throughout the mid-west and windstorms in Florida and the east coast, he notes. “For us, this goes back to some of the resources we have here that are exciting to have. We have engineers on staff that can provide guidance, and isolate what the risks are in certain areas and help us better identify what is the real exposure. If the underwriter says we think your exposure is $600 million in this region as a worst-case scenario, and we have an engineer on staff–oftentimes who’s been trained by the underwriter–and his analysis is $400 million, that’s a huge gap and we can start negotiating that $200-million-dollar differential. That helps the client because we can then negotiate the rate down or just get more coverage.”
While with AIG, moves from accounting into underwriting for professional liability
FINPRO brokering and managing E&O programs
Moves to Johnson and Higgins (J&H)
Forms Jones Brown with five other partners
Jones Brown profiled in Rough Notes, a US magazine for independent brokers
Joins Willis Canada as executive vice president in charge of regional financial institutions practice
Fill in the Blanks
My son’s hockey. Most of the winter we’re at each game and coaching him through the whole process, helping him continue on his sports career.
Dream job outside of insurance:
I’ve had a lot of occasion to try and think of what could be as satisfying. It’s hard to be able to think of something that’s as vibrant and exciting as what we’re doing every day.
I am a car enthusiast. I always favoured the muscle cars, but I’ve become quite partial to the efficiency of German cars.
Advice For Young Brokers
The biggest and most important thing for them to do is understand insurance. Spend the time underwriting. I remember how it was when I first started out. It was the most frustrating time of my career. But it is invaluable to understand how it works and understand the intricacies of the policies.
© Copyright 2010 Rogers Publishing Ltd. This article first appeared in the July/August 2010 edition of Canadian Insurance Top Broker magazine.