Hungry for risk

Demand for commercial property is at its lowest level in a decade, according to the Royal Institution of Chartered Surveyors. And given the state of the economy, you might think it’s not the best time to get into the sector. Bernard Mageean, QBE’s new head of property, disagrees. He has launched a major recruitment drive in the London market and aims to grow QBE’s property book by £200m in the next five years.

Crazy confidence or an astute reading of the market? Well, seated in his glass-walled office in QBE’s plush Plantation Place headquarters, Mageean seems a down-to-earth chap, hardly given to wild notions. And with a 32-year pedigree at RSA, he knows his stuff. So what’s the plan?

“We need to be much bigger in property in the UK. We have a sizeable European book already and in the UK we are much bigger in the motor, casualty and professional indemnity markets. But our share of the property market is pretty tiny – we’re about 14th.”

So far so good, but there’s a healthy amount of capacity in the market and it is dominated by the top five brokers, which control more than 50% of the business. So how is Mageean going to stand out?

“You need a risk appetite, you need capacity, you need good underwriters and good relationships with the key brokers,” he says. “If you get that right, you’ve got half a chance.”

Half a chance might not be enough. The head of property at one of the top five brokers says that although QBE has a solid reputation, there is plenty of capacity in the market from established insurers and, with rates so low, little opportunity to offer discounted rates to attract new business.

“It’s a very mature market – it’s full already. Anyone who wants to make a name will have to do something very special.”

On the upside, the broker adds that Australian-owned QBE might have a natural affinity to the Australian developers now dominating the UK property scene.

“It is no good waiting until you have incontrovertible proof that the market is going up, because by then it will be too late.

Bernard Mageean

Mageean acknowledges that these are times of unprecedented economic turbulence, but reckons QBE, the quiet man of the UK insurance market, can use this to its advantage. “The credit crunch brings its own challenges and its own opportunities,” he says. “QBE is very well placed in terms of its financial strength so we are in a good position to grow, and get ready to grow.”

Moreover, he believes there are signs that the property market is beginning to harden – and this is the best time to get a foot in the door. “It’s being ahead of the cycle that’s important,” he says. “It’s no good waiting until you’ve incontrovertible proof that the market is going up, because by then it will be too late.

“There are signs the market is changing – some companies are putting rates up, there’s pressure on commissions.”

If the property market itself is lingering in the doldrums, there are still plenty of offices to be insured. “There are a lot of stories in the press about new buildings being delayed,” Mageean acknowledges. “But I don’t feel it will have a big impact on the insurance market. The number of buildings exposed in the UK doesn’t change that much over time. Buildings are knocked down to make way for new buildings, so if the new buildings don’t come, the old ones don’t get knocked down.”

In his sensible northern tones, Mageean, relaxed at his desk, sipping a Diet Coke, offers a reassuring presence that lends credence to his words. No doubt this will come in handy when he has to convince brokers to place business with QBE. He has already been knocking on doors with Peter Fice, his new head of property operations in the London market, and plans to step this up in the coming months as more products become available from QBE.

The temptation might be to offer unsustainable deals on commissions to entice new business but Mageean agrees with recent comments from certain industry chiefs that commissions have reached their limit. “I’m very concerned about some of the commissions that have been paid for schemes and portfolio transfers, and some you hear quoted for property owners business,” he says.

Instead, he plans to trade on QBE’s strong underwriting skills. “Our USP [unique selling point] is the way we trade – the way we underwrite,” he says. “QBE has a distinct product range and a reputation for underwriting some more complex risks.”

Mageean also emphasises QBE’s focus on commercial lines, in contrast to its major competitors. He believes this, coupled with its structure of managing each business line separately, will give it the edge. “I’ve got a strong focus on one class of business, and the brokers that specialise in my business line, which brings a greater focus.

“The issue is how much money you make on your product line, not necessarily your cost line.

Bernard Mageean

“There are numerous business models in the market, and for some of the more personal lines-dominated insurers, the focus is on cost reduction. In personal lines, every per cent saved delivers growth and the way those insurers get ahead is to transport their personal lines model into commercial lines and squeeze out those cost benefits. At the other end of the spectrum, QBE and many of the Lloyd’s syndicates focus on a particular product line. There, the issue is how much money you make on your product line, not necessarily your cost line.”

Mageean has a catchphrase that sums up his approach – “putting more science into the art of underwriting”. He says strong technical skills and emerging technologies can enable his underwriters to quote the best price, because they will best understand the risk. To this end, as well as recruiting senior and middle level underwriters for QBE’s London market property business, he is on the hunt for geographical risk analysts. “They’re the people that help build the price models and mapping tools,” he says. “My goal is that at the point of underwriting, underwriters have as much information as we can give them. It’s a major investment for us.”

When asked what he is like to work for, Mageean loses his poise just a little. “That’s a very unfair question,” he mutters in surprise, but he remains good humoured. “People know where they stand with me,” he begins. “A lot of people like that. I’m often described as firm but fair.”

Perhaps unused to talking about himself, Mageean soon relaxes and, laughing, admits: “I think I have a lot of great ideas, but I’m not sure the staff who work with me think all of them are that good! I like to have fun – to work hard, yes, but to have fun as well. And this isn’t just about me. It’s a great opportunity for the property division and that generates its own excitement.” In fact, the task ahead is so great that Mageean has drafted in change consultants to help.

He chose property as a career through a “process of elimination”. Although he now tells his family he was too poor to have gone to university, that’s not strictly true. “I just didn’t want to. I looked around, and was made an offer by Sun Alliance. They seemed the most interesting opportunity, so I joined up and I was there for 18 months. Then I moved to Leeds and that really sparked my career.”

It was in Leeds that Mageean learnt the ins and outs of property underwriting, aided by a mentor, Frank Savage, whom he remembers fondly. “It was there that I got the thirst for learning and developing, and then I was given a leadership role, and that’s what I really enjoyed. From there it just happened step by step.”

Mageean stayed at Sun Alliance, later RSA, for 32 years – until QBE came knocking. He downplays the significance of this – “a lot of people said it must have been a hell of a decision, but it was pretty straightforward” – and is reluctant to talk about RSA in any detail. So here’s another unfair question: what kind of leaving present did he get after 32 years? “None. Not even a letter. You’d have to ask RSA why.” But he won’t be drawn further.

So, diplomatic and discreet as well as experienced, ambitious and good humoured, Mageean is a force to be reckoned with. He’s determined to push QBE up the ranks and his message of steady growth predicated on solid underwriting and strong, unshowy business nous fits with QBE’s wider image. Can anyone make hay in the economic downpour? Mageean might just be your man.