Marsh Inc. already is one of the world’s largest insurance brokers, but its chairman and chief executive, Brian M. Storms, wants to increase its role in the risk management business.
As Storms sees it, Marsh should be “the No. 1 strategic risk adviser in the world,” and he’s working toward repositioning the company so it plays a greater role in corporate risk advice and consulting worldwide.
Storms said in an interview with The Associated Press last Thursday that risk management is increasingly important because globalization has made companies more vulnerable to the impact of climate change, oil shocks, storms, terrorism and other threats.
He spoke a day after the World Economic Forum issued its annual report on global risks. Marsh Inc. is the brokerage division of New York-based Marsh & McLennan Companies Inc., one of the main sponsors of the forum’s report.
Storms, 52, took over as head of Marsh 15 months ago when the company was in the throes of reorganizing after an investigation by New York’s attorney general and federal agencies disclosed bid rigging, price fixing and a commission structure that regulators said was abusive.
Marsh & McLennan replaced its chief executive, Jeffrey Greenberg, with Michael Cherkasky, a lawyer with enforcement background, and in January 2005 agreed to pay $850 million in restitution to the investigation.
The company has been struggling since to regain its profitability, and some market analysts believe that the direction Storm is taking the Marsh brokerage will pay off.
Earlier this month, Citigroup analyst Keith Walsh upgraded Marsh stock to “buy” from “hold” because of “our increased confidence that Marsh CEO Brian Storms will be able to revitalize the core insurance brokerage unit.”
Walsh also cited plans by Marsh & McLennan to sell off its troubled Putnam Investments unit. Recent reports have indicated that Marsh & McLennan has reached an “agreement in principle” to sell the unit for $3.9 billion to Power Corp. of Canada, a Montreal-based company that controls one of Canada’s leading mutual fund firms, IGM Financial Inc.
Storms was an executive with UBS Global Asset Management before joining Marsh & McLennan. He headed the company’s Mercer Human Resource Consulting division before he was tapped to run Marsh Inc.
He said he was moving Marsh and its 26,000 employees toward a greater role in risk advice and consulting because “risk is becoming a significant issue” for corporate managers and their boards.
Increasingly, Storms said, things that happen half way around the globe can affect a business. He said, for example, that a bike manufacturer in Seattle might not think much about the risk of a storm in Asia until a tsunami hits Taiwan, where its bicycle parts are made.
And, he said, there was a correlation between how companies prepared to deal with risk and the cost of their insurance coverage.
“Say you have a hotel company from Louisiana,” he said. “If it has a plan — building codes, contingency plans for handing emergencies, basically a better risk profile than the guy next door — it will get a better price on insurance,” he said.
Storms said that Marsh was well positioned for the broader role because the company has a variety of resources in-house to draw on, such as Kroll security and Guy Carpenter reinsurance.
And, he said, companies want more help in dealing with risk.
“When you gather around the table, you have your lawyer and you have your banker and now you also have your risk manager,” he said. “And I want that manager to be Marsh.”
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