M&A meets Generation Y, prompting talent upheaval for years to come

A combination of the plethora of mergers and acquisitions (M&A) in the re/insurance industry and the attitudes and expectations of Generation Y (the generation born primarily in the 1980s and 1990s, also sometimes referred to as the Millennials) to their careers means the industry is experiencing higher than normal levels of turbulence in its workforce at the moment, according to recruitment experts.

The high levels of consolidation in reinsurance in particular has become a fact of life in recent years as companies have been squeezed on both sides of the balance sheet by a combination of low investment returns and soft rates. More deals driven by these forces are expected to emerge in 2016.

There were some very big deals in 2015, including the $28.3 billion tie-up between ACE and Chubb, the $18 billion deal that created Willis Towers Watson and Exor’s lengthy battle to finally acquire PartnerRe for $6.9 billion in July last year.

M&A bring many benefits to companies, including cost efficiencies through greater economies of scale, a greater market share and even tax gains. However, they can also mean disruption and spell bad news for the employees that work there due to redundancies, a duplication of roles and management changes.

The bottom line is that, whether they are pushed or they jump, executives senior and junior assess their options at times of change. This results in higher levels of people moves in the industry.

“With M&A, companies can put all recruitment on hold whilst they join the two companies together. Unfortunately, you will always have a duplication of roles when that happens, usually resulting in redundancies, this inevitably creates a knock-on effect across the board which sometimes creates an unhappy atmosphere,” says Steven Lawes, chief executive officer of Lawes Consulting Group.

Mark Heagney, management consultant at Hays Insurance, agrees: “When organisations merge, often new heads of departments like to make their mark and implement their own operating models which, as a result, creates new vacancies.”

Welcoming Generation Y

However, it isn’t just M&A to blame for triggering this uplift the movement of talent in the industry. The industry is also starting to see the impact of Generation Y coming through the ranks. This new generation of workers, who are starting to hold more and more senior positions in the industry, have different values and career expectations compared with their parents—the baby boomers generation.

A survey of insurance executives conducted by Hays Insurance found that 59 percent of respondents said they will likely change jobs in the next 12 months and the main benefits they are seeking include competitive remuneration packages, clear career progression paths and a range of flexible options tying into a better work-life balance including extra holidays and flexible hours.

“We are finding that Generation Y employees are more motivated by financial support for studies, flexible working, and more days of annual leave,” Heagney says. “A lot of employees also often move for career progression. So if they feel that they’ve got to a certain level within a company and hit a ceiling, they will often move to jump up to that next position at a different organisation.”

This is in stark contrast to the values of the generation that preceded them, which had lower expectations and, having experienced more turbulent times, a greater appreciation of job security.

“In contrast, baby boomers cite work-life balance at 25 percent, job security 18 percent and benefits package at 17 percent, and only 2 percent consider career development,” Heagney says.

All this means companies desiring a stable workforce and wanting to keep the best talent need to pay close attention to the changing values and motives of their workforce. The research and Heagney’s comments suggest that in order to attract and keep the best talent, organisations must adapt their offering to different age groups in order to keep employees happy and loyal to the firm.

A rising tide

While career moves driven by M&A might be considered reactionary and the changing values of the workforce are explained by sociology, there is also a third very positive reason that people are changing jobs at the moment: a renewed confidence in the economy.

“There is growth within the market at the moment, this growth provides confidence accross the market in general,” says Lawes. “If the economy is doing well, generally people have confidence across the board. If the market is poor, people tend to sit tight and be content with their current role. If you are fully confident there is good activity out there, the appeal of going to another insurance company/broker is stronger.”

Lawes adds that this dynamic also plays into the hands of individual executives seeking new experiences and opportunities. “It’s a very candidate-driven market at the moment, so candidates can hold the majority of the strings. Generally, candidates are also generally seeing a salary increase when moving across to an employer,” he says.

Some parts of the industry hold in particular appeal at the moment. Both experts agree that managing general agents (MGAs) are “flavour of the month” at the moment with many talented executives either forming or being recruited into ambitious and fast growing MGAs.

Heagney says he has seen a lot of growth in the area with both carriers more willing to back start-up MGAs and brokers setting up MGAs as well. Many are at quite an early stage, so they are seeking a variety of staff for different areas of the business including underwriters, back office employees, operations staff, and in finance.

Lawes explains: “The most buoyant market across the sectors seems to be MGAs, because they are growing quickly as well as new start up’s entering the market - they are the most forward thinking in the market at the moment.

“There are still people entering as new MGAs, insurers seem keen to support the MGA market. There are also some big venture capitalists out there that have invested heavily in the broker market and the MGA market.

Another recruitment expert for the insurance field, who wished to remain anonymous, also agreed that MGAs are a hot topic in the recruitment world right now.

He said: “MGAs are popping up everywhere. That’s because there is a real trend, particularly in the US, of big is beautiful, and not only that, where everyone is obsessed with top line, everything from a client’s perspective is getting very heavy; it’s almost becoming too cumbersome,” he said. “A lot of the talented underwriters are moving to the fringes.

“They’re going to the younger start-ups where they rent office space for six months and are going to go and set something up. They haven’t even got an accountant and they’re trying to figure out how to do it, which is really cool. It’s letting the entrepreneurial spirit kick off again, which is never a bad thing.”

As well as MGAs, Heagney said that there is interest in many other areas of the industry when it comes to where employees are heading right now, including political risk, war, terrorism, property and cyber risk.

Taking all of this into account, to retain staff, re/insurers and brokers will have to make sure they are providing employees with the benefits that are most suited for them and keep up with relevant trends – otherwise they may find themselves losing talent to their rivals.