MAY 2013

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SOLAR HITS ITS STRIDE

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Ironshore’s Kevin Kelley is in it for the long run. page 22

Building A Global Platform

Drug Monitoring

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Executive Air Safety

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22 R i s k & i n s u R a n c e ®

community; IronPro, which handles D&0 and other professional liability lines; Ironshore Environmental; and Ironshore Specialty Casualty, which provides cover for high-hazard risks in such sectors as energy and transportation, among others.

Kelley is collaborating with his mentor Hank Greenberg, former CEO and chairman of AIG, on Ironshore’s Aviation products, the underwriting manager for which is Starr Aviation Agency Inc., a branch of Greenberg’s Starr Companies.

The two have also joined forces with the Iron-Starr Excess Agency Ltd., a managing general underwriting agency that is underwriting financial lines and specialty casualty, with the Starr Companies and Ironshore providing coverage capacity.

Those who know Kelley well describe his love for the business. When we interviewed Kelley and asked him about what still energizes him about

what he does after more than 35 years in commercial insurance, his face lit up with the enjoyment of it.

“You have to have a passion for this business,” he said.

“It is all about risk and it is always evolving and always changing, and generally misunderstood and generally underestimated. There are so many life lessons that can be taken from it that can

be applied to other things and so I thank my lucky stars I found it,” he said.

That intensity for the business, he said, is something that was exercised by his former colleagues at AIG, where Kelley was a standout among a talented group.

“He is passionate about his work, that’s why I thought highly of him and the job he was doing,” Greenberg said.

“But many people in my former company were passionate about their work. That’s what made us different than so many others. Things didn’t begin at nine o’clock and end at five o’clock. It’s infectious

Summary• Ironshore has its major pieces in place, and is now building on that foundation.

• The AIG culture evidently stays with those who were trained in it.

• Gross written premiums at Ironshore have more than quadrupled since the end of 2008.

● Cover Story

The foundation is in place. Now we can watch the building rise.

Kevin Kelley is in his fifth year now as CEO of the Bermuda-based excess and surplus lines carrier Ironshore, Inc. The executive, who is credited with building the AIG subsidiary the Lexington Insurance Co. into an excess and surplus lines giant before his late 2008 departure from the AIG fold, has had time at Ironshore to create a focus and deploy his forces.

As an example of how quickly Kelley has moved, Ironshore’s gross written premiums were $383 million in 2008. Kelley joined the company at the end of that year.

Gross written premiums for Ironshore stood at $1.7 billion at the end of 2012, according to information provided by the privately held company.

That’s substantial growth, but don’t expect Ironshore

to get into 30 or 40 businesses any time soon.“We are in 12, 13 different businesses; diverse,

but yet focused, that is the key for us,” Kelley said during an interview at his company’s offices on State Street in Lower Manhattan in March.

“Our view is pretty simple. In a world where GDP growth is going to be constrained and most likely constrained for some period of time, in order for a company like us to earn market share we just have to be good at what we do,” he said.

“We think focus is omnipotent for us,” he said.Some of Ironshore’s product lines include

IronHealth, which serves the medical provider

and either they can live in that kind of environment or they can’t. It’s a cleansing process for those that have other things to do after five o’clock,” Greenberg said.

Under the umbrella of Kelley’s leadership traits, we can include the importance of having a keen nose for evaluating risk. Those who have worked with him during his more than three decades in the business said he has as good a nose for risk as anyone in the industry.

“I would put Kevin as one of the best underwriters that our industry has ever had,” said Michael O’Halleran, an executive chairman with Aon Benfield based in Chicago.

“He has an incredible intellect for risk and understanding of risk. He also has vision, and so with that vision, he is able to project into the future, what are the emerging types of coverage, emerging types of issues and through his experience has a very creative approach to underwriting,” O’Halleran said.

“Kevin is the kind of guy who is an underwriter’s underwriter at the end of the day,” said Joe Taranto, CEO of Everest Re. Taranto, like Kelley, is an alumnus of AIG and worked with him back when Kelley was building Lexington.

“I don’t think he would go into an area unless he understood it in a very thoughtful and detailed way,” Taranto said.

With cyber risk on everyone’s minds these days, we asked Kelley about it when we spoke. He qualified it as an emerging risk and had this

Building a Global PlatformIronshore’s Kevin Kelley

is in it for the long run. By Dan reynolDS

“I woulD put KevIn aS one of the BeSt unDerwrIterS that our

InDuStry haS ever haD.” —Michael O’Halleran, an executive chairman

with Aon Benfield

M a Y 2 0 1 3 23

Ironshore’s KevIn Kelley as he discoursed in Lower Manhattan in March.

“I Don’t thInK aBout a legaCy. I Don’t even Know

what that IS.”—Kevin Kelley, CEO of

Ironshore

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M a Y 2 0 1 3 23

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to say about underwriting that and any other emerging risk: “Any time that you have an emerging risk, the challenge that you have is that the people who are most interested in buying protection are the ones who are most exposed,” Kelley said.

“At the beginning stage of any emerging risk the critical point is selection against and trying to cultivate a market. The key to any market is cultivating it so that the people who buy aren’t just the people who are going to have losses,” Kelley said.

We have all heard about the pressured, perhaps naïve, capital that might underwrite certain risks because it wants, perhaps needs, to have the business.

The key, Kelley said, is not to have to do anything as an underwriter and allocator of risk-transfer capital.

“The worst thing you want to do is be naïve because you are going to lose capital,” Kelley said.

“The key is to never, ever have to do anything as a risk taker. The key is to have enough balls in the air, so to speak, so that if one doesn’t prove fruitful you don’t necessarily have to pick it up,” he said.

Another key is to have the right talent on the ground to accomplish

your goals.“What he has done, you don’t do

that by yourself,” said Everest Re’s Taranto. “You don’t do that without having a lot of lieutenants, sergeants and privates who know what they are doing,” Taranto said.

“The key to getting something done that was that big (Lexington) is to kind of multiply yourself through others,” he said.

“I think he has an exceptional eye for talent and his management style encourages people who are similarly motivated to perform,” said Nick Cortezi, CEO of All Risks, Ltd., a wholesale broker based in Hunt Valley, Md.

“You simply can’t do it yourself and Kevin has been able to surround himself with exceptionally talented people who execute on a mission,” Cortezi said.

When Kelley left Lexington at the end of 2008, it was big news, and even bigger news for who he took with him to Ironshore. Shaun Kelly, Lexington’s former president and chief operating officer also moved over.

The Bermuda-based upstart that was founded by industry patriarch Bob Clements also picked up former AIG environmental executives Joe Boren and John O’Brien, as well as

AIG veterans Greg Flood and Mike Mitrovic, who work with professional liability lines.

DomeStIC vS. InternatIonal

Approximately 80 percent of Ironshore’s business is for U.S. companies, with 75 to 80 percent of that written in the United States, Kelley said. Ironshore writes approximately $600 million in business that is written outside of the U.S., including Bermuda, of which the majority is being written out of Lloyd’s. Ironshore is now writing business from locations in seven countries worldwide. In late 2012, the company announced the opening of an office in Singapore, which Kelley described as a strategic move.

“We go into any non-U.S. locale in a very measured way, so Singapore for us is kind of a small bet,” Kelley said.

“It really allows us to see what is going on in Asia, particularly as respects trade,” he said. “So it is probably as much strategic as it is operational.”

Kelley said the company was aiming a larger set of resources at Australia, which is a big supplier of natural resources to increasingly

industrialized China and Southeast Asia. For that responsibility, Kelley has tapped David Rogers as managing director.

In doing so, Kelley is building on a technique honed by Greenberg, who built AIG in part by using trusted,

well-known lieutenants to open up new markets.

“The best way is to put talent in a so-called outpost that you know, and if you can do that you are about 75 percent there, because talent that is homegrown is the best,” Kelley said.

the aIg effeCt“Hank was a great teacher,” Kelley

said of the business leader who educated him about so much.

Greenberg talked of the environment at AIG, that it took a certain type to not only handle it but thrive in it. Kelley said it was the right place for him.

“One of the things that I was very lucky to hear, very early in my career — and I heard it on a radio interview from an individual who was an executive recruiter — he said the best advice he could give to anybody was to find an organization that appreciated their personal characteristics,” Kelley said.

“And for those that thrived in the AIG culture, it truly reflected our characteristics. You had to be competitive, you had to have a passion for performance, you had to think strategically and you had to have a pretty good nose for the operating side of the business,” he said.

“Most people are attracted ultimately to the places that truly bring the best of them out.”

People are attracted to working for Kevin Kelley for the same reasons.

“Kevin is somebody that people will follow very quickly because he has a passion and vision,” said Aon Benfield’s O’Halleran.

On the speed at which Kelley built Lexington and now Ironshore, O’Halleran said, “Speed is only directly related to the fact that he was able to attract, in both places, incredibly talented people who wanted to follow Kevin and his leadership; and to be

able to move quickly but diligently, demands that you have the right people, and he has always been able to attract the right people.”

Sometimes leaders talk about legacies, but Kevin Kelley won’t.

“I don’t think about a legacy. I don’t even know what that is,” he said.

Kelley, who runs marathons and began working in insurance in 1975 said, “In the culture I grew up in, at my age, you’re a kid!”

DAn ReynolDs is editor-in-chief of risk & Insurance.® He can be reached at dreynolds@lrp.com.

“It’S a CleanSIng proCeSS for

thoSe that have other thIngS to

Do after fIve o’CloCK.”

—Starr Cos.’ CEO Hank Greenberg, on the intense

environment at his former company, AIG.