After leading Chicago's unsuccessful effort to land the Olympics, Patrick Ryan is jumping into something he knows a lot better than the Byzantine politics of the International Olympics Committee — the insurance business.
Mr. Ryan on Tuesday announced that he's creating a new company, Ryan Specialty Group, which will underwrite and place specialty and hard-to-place insurance coverages not handled by conventional commercial brokers, such as the Chicago-based company he founded, Aon Corp.
Mr. Ryan is teaming with Timothy Turner, former president of the nation's largest wholesale broker, CRC Insurance Services Inc. Mr. Turner will be a managing director at Ryan Specialty Group.
He also is creating a subsidiary in London that will specialize in specialized insurance for financial companies.
Mr. Ryan, 72, announced in December his chairmanship of a Kansas City-based outfit, ThinkRisk, providing underwriting and claims management services to insurers in the media, technology and advertising industries. ThinkRisk now will be a subsidiary of Ryan Specialty Group.
“I love the insurance business, and I particularly like this segment of it,” Mr. Ryan said in an interview Tuesday. “I'm not the retiring kind.”
For now, he said he is capable of funding his new company by himself. But potential outside investors have said they'd be interested, and he didn't rule out an initial public offering in the future.
“We're going to build a serious company,” he said.
Mr. Ryan has been careful not to enter businesses in direct competition with Aon, in which he still has a considerable stake.
When Mr. Ryan ran Aon, it was a big player in these so-called wholesale brokerage services, owning one of the biggest in that business, Swett & Crawford Group. But Aon sold Swett & Crawford in 2005, after Gregory Case succeeded Mr. Ryan as Aon CEO.
Wholesale brokers get their business from retail brokers like Aon, and Mr. Ryan said, “I would hope and expect that Aon would be a client. I would hope other large brokers would be, too.” But, he emphasized, “There's thousands of agents and brokers in the world.”
Wholesale brokers typically make higher commissions than retail brokers, who buy insurance on behalf of businesses.
In addition, a subset of the wholesale universe, managing general underwriters, makes much higher commissions because it handles most of the functions, like underwriting and claims management, that insurers typically do for businesses with highly specialized needs.
In addition, unlike the big retail brokers like Aon and Marsh & McLennan Cos. that gave up back-end, profit-sharing payments from insurers under pressure from then-New York Attorney General Eliot Spitzer, wholesale brokers are able to participate in such programs, giving them another revenue stream.
Mr. Ryan acknowledged that brokers of all stripes, whether retail or wholesale, have seen their revenues fall along with the insurance premiums on which their commissions are based. But he said the timing for his market entry is good because talented producers may be more open to move to a startup than during good times.
“I'd rather be too early than too late,” he said.
[This story first appeared in Crain's Chicago Business, a sister publication of InvestmentNews.com]
