During his years in insurance, John Mentz has observed some substantial changes. But one change he believes has had a particularly significant impact is the ease with which capital can now move into insurance.
“When I started, it was not easy for new capital to come into the insurance business. There were far too many barriers [to] entry to get that capital into the business and deploy it,” he says. “Today, those barriers have greatly been broken down. The financial market is just more efficient today than it has been in the past. And with the advent of sidecars, insurance-linked securities, hedge fund reinsurers and other vehicles, this has allowed pension funds, hedge funds, private equity firms and high-net-worth individuals to invest and put capital directly into the insurance market.
“And I think the ease with which the capital is coming into the industry has changed the competitive dynamic greatly in many segments of the business,” he continues. “What used to be predictable market behavior in response to good or bad industry results is now more uncertain, as new capital can easily come in and be in a new segment much more quickly than it was in the past. I think this is likely to lead to a leveling of some of the market swings that the property & casualty industry has had, which hopefully is a good thing for the industry, in terms of providing a [more stable] environment for its customers.”
Mentz has worked in insurance since he was a sophomore in college. A math major, he got his first taste of the industry through an actuarial internship with a property & casualty company.
“I thought that was a great introduction to the insurance business,” he says. “It was a good chance to see all the aspects of an insurance company – from product pricing to balance sheet reserving to claim handling to underwriting, and exposure to virtually all functions of the company.”
Mentz has been part of
Arch Insurance Group since it was founded, a tenure he credits with providing him both his best and most difficult times in insurance.
“I was hired to build out a business unit that was specializing in insuring large contractors, and that challenge of starting the business from scratch was much more daunting and intimidating than I thought it would be, but it was also very rewarding,” he explains. “In terms of starting up a business, you have to
hire a team, convince others to join a startup organization, develop a unique business approach and gain acceptance in the market. Starting up a business unit from scratch I view as one of the greatest challenges I’ve faced, as well as one of the greatest accomplishments, in terms of building a business unit that has been a good, sustainable business segment for Arch for going on 15 years now.”
The talent pipeline
Today, Arch Insurance Group, a division of Arch Capital Group, is a global insurer that provides specialty risk solutions. In Mentz’s view, what separates the company from its competitors is relatively simple.
“I think a great strength of the Arch organization is the responsiveness and flexibility that the organization has to respond to the ever-changing needs of the market,” he says.
“And much of that success and many of our successes have come from individuals and teams responding quickly to market opportunities. I think that’s a result of having an innovative and entrepreneurial culture. I certainly view Arch as being a company with big-time financial capabilities, but also a company that is entrepreneurial and innovative in spirit.”
He adds that a further hallmark of Arch is its striving to secure great technical resources for each of its specialties. “We want to have experts in each of the given business segments that we’re entering, and then give them the environment and support that they need to succeed,” he says.
“And our organization values the expertise that the individuals bring to the table.” Of course, attracting great people is an issue that continues to plague the global insurance industry. On the subject of recruiting the next generation of insurance professionals, Mentz says he thinks it’s about focusing on attracting young job-seekers.
“The insurance business is a business that’s very hard to get into later in your career,” he says. “It’s just such a specialty and deeply niched functionality type of industry. So, it’s hard for those later in their career to make the switch to insurance, which means that you just have to be focused on getting young people into the organization.”
And once those young employees are recruited, he adds, it’s essential to then ensure they have training and development opportunities, as well as career paths.
“There’s obviously more turnover with younger folks that are early in their career,” Mentz says, “but I think the investment in getting them into the company and giving them training and development opportunities, as Arch does, is one that when you get people who stay in the business, you’re more likely to develop some real stars.”
A digital world
Mentz also talks about the importance of keeping pace with technological changes.
“Our customers’ businesses are changing with technology, so we have to be responsive to their risk management needs as their risk practices change,” he says. “We also have to adapt our business model and utilize technology to most effectively and efficiently serve our customers.”
To that end, Mentz mentions the significant investment Arch has made in predictive analytics.
“I think a big piece of technology in the insurance industry is that it aids in operational e ciencies, but I think it also aids in our understanding and pricing of the insurance products,” he says. “A lot of the predictive analytics driven by big data is something that is hugely important to the success of the insurance industry, and I think those who do that better will end up with much better results.”
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