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Global clients and growing risks

Subramaniam, reflecting on the challenges during his time as CEO, says, “Tomorrow always trumps yesterday.” While his initial challenge in 1999 was integrating five companies into a single enterprise—and doing so during the prolonged soft market of the late 1990s—he speaks more in-depth about the current challenge: serving clients that are rapidly expanding into new regions around the world.

The typical FM Global client, he says, is multinational and growing outside of its own footprint—for example, a company based in Cleveland or San Francisco, but growing outside of North America.

“And when they do grow outside of North America, almost always they’re not building what we call greenfield facilities; they’re buying some existing facility somewhere else to add to their network,” Subramaniam explains. “And almost always the quality of those locations, of those divisions they acquire, are not as good as the quality of the locations they have within their existing footprint.  So our clients are growing, but the risk quality is getting worse and the risk-management challenges are getting more significant.”

On top of that, he says clients are not all growing in the same territories, but rather in different regions with different licensing requirements and regulations.

For FM Global, which places its emphasis on risk management, this evolving global landscape, while presenting new challenges, has also brought opportunity. Subramaniam points out more companies today are focusing on risk-management needs, and the role of the risk manager within companies is expanding. 

“One of the reasons for our success is the fact that the risk-manager role in our clients’ organizations has become so much more sophisticated and is at a much higher level than it used to be,” he says. “So the result of all of that is our products and services have become more attractive because the clients that we deal with—these things are more important to them.” He says the same companies 25 years ago may have been just buyers of insurance, whereas today they are managing the risk of the enterprise, which dovetails with FM Global’s strategy.

As for the challenges, Subramaniam says as clients grow, the risks grow with them, and companies’ rate of expansion can outpace the ability to effectively manage the risks. To assist clients, Subramaniam says FM Global routinely works with local authorities in the new territories to improve codes and standards. The insurer also aggressively looks at engineering and risk-management schools in those territories to find local people to hire and train (with the training almost always done in North America). FM Global hires locally, he says, but must make sure the focus around the world is no different than the corporate culture.

Lawson says the key for FM Global, as a research-based company, is to make the necessary investments in research and science to help stay on top of the developing risks. The business model for the company does not change, he says, but the technology does, particularly as it relates to emerging risks such as cyber.

That focus on science and resiliency also helps set FM Global apart as the insurance marketplace changes. Lawson mentions the capacity in the reinsurance market today, saying there is “more capital than we’ve ever seen.” It “has a competitive effect,” he says, but adds, “The key for us—regardless of what happens in the market, our model doesn’t change.” 

FM Global, he notes, has stuck to commercial property, and will continue to do so.

Subramaniam agrees, noting the company’s overall approach has remained the same, even if the scale has changed. He says there’s always a place for a company that can provide services to clients while also offering large amounts of underwriting capacity on a worldwide basis. “There’s a place for a player like that, and that’s FM Global.”