The professional risks pro

David Howden, director of Howden Insurance Brokers and chief executive officer of the Hyperion Group, has worked in the insurance industry for more than 23 years after joining the family business, Alexander Howden Insurance Brokers, at the age of 17.

The Howden name is well known in the industry and dates back to 1820, when it began as one of the original Lloyd's shipping brokers. Although David Howden says he wasn't destined to follow in his family's footsteps, having joined in unfortunate circumstances after breaking his back on the rugby field, he has made an equally good name for himself.

Howden has been at the forefront of the development of directors' and officers' and professional indemnity products worldwide. He is a frequent speaker at international conferences and has acted as an expert witness in numerous complex legal cases.

In 1988, at the age of 25, Howden formed a specialist D&O and PI subsidiary of Lloyd's broker Regis Low, Howden Howells and Pangborn. Following the acquisition of Regis Low in 1991, he became managing director of Steel Burrill Jones Professional Risks. Three years later, in 1994, Howden successfully organised a management buyout to form what is now Howden Insurance Brokers.

HIB now claims to be the largest independent Lloyd's broker specialising in business-critical risk insurance. It has a presence in more than 50 countries worldwide, offering both retail and wholesale broking. Its premium income of around £200m has been achieved through organic growth and acquisitions and the firm now employs almost 300 people.

The Lloyd's factor

HIB's head office is in the City of London and employs more than 100 people. It also has relationships with a range of territories that are crucial insurance centres, such as the US, Continental Europe and Bermuda.

Around 60% of its business goes through Lloyd's.

Howden says: "Lloyd's has a huge amount of value - it is a very old, established institution and has an extremely good reputation. Unlike many insurance companies, it has never gone bankrupt and has licences around the world that are important to us as an international broker."

While Howden acknowledges that compliance with the Financial Services Authority is time-consuming and costly, he believes regulation has been beneficial to Lloyd's, which has brought in a number of changes.

However he says: "I hope we don't get over-regulated. Lloyd's has changed for good in many ways. I hope it doesn't lose its entrepreneurial spirit. It has always been able to make quick decisions on very big risks. Broking is about flair, underwriting expertise and knowledge. I hope regulation doesn't dumb us all down - you need to have people that can think outside the box and do things differently."

Howden puts HIB's success down to its decision to specialise in liability insurances. It focuses solely on providing liability and crime products.

As well as PI and D&O, it also offers crime insurance, computer crime cover, cyber-liability, or 'e-surance', and medical malpractice liability.

Howden says: "We decided to focus on new insurances - the insuring of intangible assets, in particular PI and D&O. The industry had tended to focus on old insurances, for example property insurance, which businesses need, but nowadays is not the most critical thing for a business. Arthur Andersen didn't disappear because its building was destroyed by fire, but because it got sued to hell."

Local and international presence

HIB has traditionally focused on the international market, rather than the US or the UK. It was the first company to take D&O to a number of countries, including Spain.

Most recently, it acquired a controlling 56% interest in Swedish intermediary Holm and Co, which will become the group's Swedish broking arm and will further consolidate the group's presence across Scandinavia. Howden has also set up Howden Insurance Brokers India, following receipt of a licence to operate as a composite insurance broker.

Although it is currently bedding down and consolidating its operations, HIB is nevertheless looking to acquire a regional UK broker. In the meantime, the company has relaunched its UK division to target the retail and wholesale D&O and PI markets.

New range on offer

Howden UK has introduced a range of new offerings for small to medium-sized enterprises and non-standard professional risks. It has also created a specialist wholesale medical PI division - Howden Medical Insurance Services.

Howden says: "The UK splits into two; first, regional brokers that know their clients' businesses well and know about liability insurances, to which we can offer a core of expertise, capacity and a claims service helping them provide the best service possible to their client. Second are brokers that have not focused on PI or D&O before, but want to offer liability insurances. To these brokers we can also provide information and advice on the products."

Howden warns that brokers need to offer liability insurances to clients or face bankruptcy. He says: "The UK is no longer a manufacturing country - it is made up of service industries, and the primary insurance that the service sector wants is liability. If brokers do not embrace this and follow their client base, they will go bankrupt."

Brokers are willing to learn about new insurances and want to grow their businesses, but often they lack the right tools, according to Howden.

As a result, he believes his company's wholesale offering will be well received.

He says: "There is a huge difference between saying you do liability insurance and really understanding it and being totally focused on it. Brokers can make a lot of money by focusing on these areas, but they need the right resources. We have a huge pot of knowledge, access to a lot of very good capacity, very good claims handling and, most importantly, fast service."

Getting to grips with liability insurances is especially important for brokers targeting SMEs. He says: "If you are an SME, you want to know that your broker can deliver the goods. SMEs are unlikely to have a risk manager and do not have the time to study the small print. But it is the small print that matters, and brokers that really want to service the SME market have got to understand the products."

The current lack of choice will also assist HIB, Howden claims. He says: "There is a vacuum in the broking market. The acquisition trail of Aon, Marsh and Willis in the late 1980s and early 1990s completely changed the face of the broking market overnight. Clients, employees, insurers and investors want more choice."

Proper broking

Howden argues that brokers and clients have suffered because of a decline in service standards over recent years. He says: "A lot of the services provided have become very standardised. Broking is about achieving something that could not normally be achieved. If you just get an underwriter to write a risk he wanted to write, you're not a broker - you're a postman.

You have to deliver an argument and achieve something. Some brokers have forgotten this and have become 'sausage machines', churning out quotes that are not relevant to the clients."

Howden argues that the insurance market has to recognise that service is important and goes beyond the quote. It has to become more professional, delivering a better, faster and more consistent service to clients, otherwise they will lose confidence in it.

He also says there is a lack of good capacity at the right price: "We have worked hard at providing a proper product that is backed by the right capacity. A lot of what we do is exclusive, the insurers trust us to understand the products and trust their capacity in us."

All of HIB's directors take a hands-on approach when it comes to placing risks. This enables it to retain influence at the most senior level with leading insurers and deliver competitive premiums. And this, combined with the company's preference to use its own policy wordings, enables delivery of affordable and responsive insurance policies.

Howden says: "Consistency throughout the insurance market's cycles is key. Although there can be great volatility in terms of pricing, we seek to provide stability. We work with insurers that are financially secure and have high ratings."

Within the specialist liability market, Howden targets specific markets such as construction, technology, telecommunications, venture capitalists and fund managers.

As Howden explains: "We are focusing on areas where there is a gap in the market and where we can add real benefit. For example, in the construction industry we feel there is a lack of expertise and service being provided both to the client and the brokers trying to serve these clients."

Personnel matters

In order to meet its targets for growth, Howden recognises that his company's main asset is its people. It has a policy of continuous education, training and assessment to ensure it has high levels of expertise.

Howden says: "Unless you have the training, you are not going to have the expertise coming through. We have a high training budget and have rigid coaching arrangements where new recruits are linked to, and coached by, a senior member of staff. We also send employees to our offices abroad to gain an understanding of the different markets. Moving people around is as important as formal training."

HIB is keen to attract graduates and, although Howden acknowledges that the pay may not be as high as in other financial services sectors, he argues that the opportunities to quickly move up the ladder compensate for this.

"Graduates may not start at the same salary level as a merchant banker," he says, "but there are people here that have come in at very junior positions who are now running our overseas companies. We are keen on providing opportunities to progress - and with promotion comes a bigger salary. Promotion isn't about 'dead men's shoes'."

In time, Howden believes, the market will split more clearly into two areas: direct and brokered insurance business. Howden believes that direct insurance has changed the market substantially. This, combined with a changing client base, is creating a divide between those who want to buy direct without advice, and those that need it.

He adds: "There will always be a need for brokers that understand their clients' business and deliver a full service. Insurance is still one of the things that we are good at. The London and Lloyd's insurance market is still the centre of the world's insurance market and has a lot of expertise to offer - and the UK broking community is more developed than that of many other European countries."

CV

1994: Director, Howden Insurance Brokers and chief executive officer, Hyperion Group

1991: Managing director, Steel Burrill Jones Professional Risks

1988: Founder, specialist directors' and officers' and professional indemnity subsidiary of Lloyd's broker Regis Low, Howden Howells and Pangborn

1982: Associate director, Nelson Hurst and Marsh

1981: Broker at Alexander Howden Insurance Brokers.