1. By focusing on specialty insurance, where expertise is a must, insurer
W.R. Berkley has seen its market share grow dramatically. As William R.
Berkley hands the reins over to his son Robert, both expect a seamless
transition.
by Kate Smith
Kate Smith is a senior associate editor. She can be reached at kate.smith@ambest.com.
Growth
Strategy
www.bestreview.com A.M. Best’s Monthly Insurance Magazine
September 2016
GrowthLeaders
2. BEST’S REVIEW • SEPTEMBER 2016
W
illiam R.Berkley handed his 7-year-old son
a broom and asked him to help sweep the
garage floor.Five years later,he brought
the 12-year-old boy to his office in Greenwich,
Connecticut,and put him to work helping out with
the family business,W.R.Berkley.
“The concept of child labor laws
was lost on my father,”W.Robert
Berkley joked.
Rob Berkley grew up working
with his dad, Bill.And for nearly
two decades now, he has helped
his father build W.R. Berkley into
a powerhouse in the commercial
lines segment.
Rob Berkley joined W.R. Berkley
in 1998 after three years as an
investment banker. Last October,
Bill Berkley handed over the reins
to his son, with Rob assuming the
position of chief executive officer
and Bill taking on the role of
executive chairman.
The transition, they say, has
been seamless.That’s in large
part because the two have been
running the company hand in hand
for years.
Since father and son teamed
up 18 years ago,W.R. Berkley has
tripled its market share in the
commercial property and casualty
space, becoming the 12th largest
writer in the U.S. In 2015, the
company claimed 1.84% of the
market, up from 1.6% a decade
ago and 0.57% two decades ago,
according to A.M. Best data (see
pages 54 and 55).
The Berkleys credit much of that success to
their shared vision and a shift in strategy at the
turn of the century, when the company withdrew
from personal lines and began to zero in on
commercial lines and targeted niches.
“We just didn’t see, in a long-run strategy,
personal lines as a place where we could
continue to compete,” Bill Berkley said.“The
broad-based personal lines business wasn’t a
place where we added value.”
Where they could add value was in niche
markets requiring specialized knowledge about a
territory or product.
“We narrowed down the areas of growth to
places where we had expertise in underwriting
particular lines of business,” Bill Berkley said.
“We effectively said that to be able to grow in
commercial lines, we had to be
able to deliver expertise to our
customers.And that’s where we
focused.”
Early Days
Bill Berkley started the
company in 1967,while a
21-year-old graduate student
at Harvard Business School.
He had graduated from New
York University at age 19 and
continued directly for his MBA.
While at Harvard,he and a
partner decided to form their
own investment management
firm,which they called Berkley
Dean & Company.They had a
$2,500 investment to get their
venture off the ground.
Among their early clients were
Lloyd’s syndicates and insurance
companies,and Bill Berkley
quickly surmised insurance
could be a promising industry
for someone with his investing
background.
“When I started in the
business,”he recalled,“I looked
at all the great regional insurance
companies—Ohio Casualty,
Western Casualty,Indiana
Insurance Group.None of whom
are around anymore.But these were great regional
companies that had unbelievably good returns
and great results.I looked at those companies and
thought,‘We can do that,I can do that.You can even
do better than that by being a good investor.’So that
was the goal.”
In 1972,he entered the insurance market
through the acquisition of Houston General
Insurance Company.The following year,Berkley
Dean went public as W.R.Berkley Corporation,with
shares costing a split-adjusted 17 cents.W.R.Berkley
stock now trades at close to $60 a share.
Bill Berkley soon found another segment of
GrowthLeaders
“I don’t think it’s the
typical transition
you may see in
other good-sized
organizations, where
somebody is in and
somebody is out. Our
goal has been that
this would be more of
an evolution both for
us and the business.”
Rob Berkley
W.R. Berkley
3. BEST’S REVIEW • SEPTEMBER 2016
the industry that had high returns—specialty
companies.
“The small regional insurance companies and
specialty companies generated much better returns
than the national companies,”he said.“And it was
a place where capital wasn’t the
driving force;expertise was the
driving force to get higher returns.”
W.R.Berkley entered the specialty
space through the acquisition of the
Admiral Insurance Company in 1979
and continued to steadily expand
into the 1990s,with revenues
passing the $1 billion mark in 1995.
But the biggest growth came when
the company decided in 1999 to exit
personal lines.
“There were niches we liked.For
instance,we stayed in the antique
automobile business,which was a
personal lines business,”Bill Berkley
said.“But by and large we wanted to
stay in places where we thought we
could add competitive value for the
customer.We recently announced
that we will be starting a high net
worth personal lines business.We
view that as a specialty business,
where knowledge and service are
highly valued.”
Renewed Focus
Refining the strategy to focus on
specialty areas paid off.
In its 2015 annual report,W.R. Berkley said
that over the past five years its total revenue has
increased 49% to $7.2 billion while its combined
ratio has averaged 95.7%. Over the past 10 years,
its return on stockholders’ equity averaged 14%.
Since 2005,W.R. Berkley has added 35 new
business units, bringing its total to 51.
“We define the business as putting capital and
people together in a way that can best serve the
customer,” Bill Berkley said.“As we started to find
outstanding people, we provided the capital and
the structure to help them build.And it gave us
the opportunity to expand.”
The bulk of that expansion has been organic.
Only seven of W.R. Berkley’s 51 business units
have come through acquisition; the remaining 44
were developed internally.
“We’re always looking to meet and find great
people,” Bill Berkley said.“The cornerstone is
finding great teams of people who are dissatisfied
with their current status or who are in part doing
something that represents an opportunity and
would like to do it exclusively.
So it’s really geared toward
finding the people who
see a marketplace, see an
opportunity.”
Autonomy and accountability
also play key roles in their
strategy. Management teams
are given broad control of their
businesses.
“We are great believers in the
idea that the intellectual capital
and expertise our people have
are the great differentiators,
especially in the parts of the
market we choose to focus on,”
Rob Berkley said.“We also are
an organization that believes
very much in accountability.
And we think if you’re going
to hold people accountable for
the outcomes, you have to give
them authority.
“The people who are most
well-positioned to make
decisions are the ones who
have the best information, and
oftentimes it’s those who are
closest to the marketplace who
have that information.”
Moving Forward
The direction of W.R. Berkley is unlikely to
change drastically under Rob Berkley.The new
CEO’s vision as a leader has been shaped by his
experience, and the bulk of that experience has
come from working with his father.
Although he grew up around the family
business, Rob Berkley didn’t go straight into
it.After college he worked in New York as an
investment banker for Merrill Lynch.
“I did that for a little less than three years.
Long enough to realize I didn’t want to be an
investment banker,” he said.“After that experience,
my father and I decided it was worth giving it a
shot to see if this business was a fit or not.”
“We effectively said
that to be able to
grow in commercial
lines, we had to
be able to deliver
expertise to our
customers. And that’s
where we focused.”
Bill Berkley
W.R. Berkley
