Henry Klecan talks about the key elements that have enabled this reinsurance company to survive through difficult times and come out on top.

When Henry Klecan came on board as president and CEO of Scor’s US subsidiary three years ago, he knew he had some serious work to do. As CEO and president of Scor Canada, he had already been informed that the group’s US operation was at the heart of a downgrade and wasn’t in good standing with rating agencies.

According to Klecan, the “triage” that had to be done a few years ago is complete. “We’ve corrected the issues and problems. Today, we’re rebranding ourselves in the marketplace as the alternative reinsurer,” he said of the New York City-based company.

Scor’s recent acquisition of Converium, a Swiss-based reinsurance company, has taken the company from number eight to the number five spot globally. The transaction, explained Klecan, provides further technical depth and financial security to Scor’s ultimate policy buyer. And as the number five reinsurance company in the world, it certainly becomes more than just a viable alternative to the top one, two, and three companies.

Henry Klecan

Scor also shares risks on individual large projects on a facultative basis. In other words, companies don’t have a treaty agreement. For example, if a company is building a petro-chemical plant that will require a substantial amount of insurance capacity, the brokers and insurance companies will come to the market to find the capacity. “We supply facultative capacity in that fashion,” Klecan said. “It’s a profession that is practiced on a worldwide basis.”

The US division has an estimated 120 employees and another 19 in Mexico, the Caribbean, and Latin America combined, regions the US division is also responsible for. Worldwide, the company has offices in more than 22 countries, with clients in more than 120 countries.

Scor deals with independent reinsurance brokers around the country. They, in turn, deal with insurance companies. That intermediary, to Scor, is an important business purveyor, and the company is committed to the brokerage community as a service provider.

“We transact with the broker, which is the first stage. The second stage consists of us wanting to know who the ultimate buyer of our product is,” Klecan said. “We’re not there to replace the broker; we clearly understand their role and function. We’re there to create a triangular relationship between ourselves, the insurance company, and the broker.”

The right platform
Klecan came on board in 2004 to give Scor’s parent company, headquartered in Paris, a better picture of what exactly was going on in the US division. “They were not getting the true story or the information that was needed,” Klecan said. “I was asked to come to the US from Canada to discover what the problem was and provide a schematic of the issues and a business plan as to how to get the company back on track.”

Klecan quickly discovered that the company was using the wrong business platform. The platform that had been adopted in the late ’90s was one of a distribution network, which gave the company a diminished focus on the technical approach to underwriting issues. “They embarked on this platform and included business lines in which they had limited understanding and knowledge,” Klecan said, noting that the company had no framework or infrastructure to support that kind of business plan.

This was also during a time when reinsurance pricing was too low, which created a highly competitive market, and everyone was talking about marketshare. “Industry executives didn’t talk about profitability—they talked about marketshare.”

Klecan had to wean the company off of that philosophy, which he said was the primary cause of the problem. But according to the CEO, it was a problem that wasn’t unique to Scor. Many other reinsurers suffered the same pains and tribulations, and many have decided over the last number of years to simply withdraw from the US marketplace.

“Before I arrived, I had a conversation with the home office and asked them if they wanted me to kill the entity and just bring it down to a run-off, or find a solution to maintain it,” Klecan said. The overall view of the group’s general management as well as the board was to find a solution for the US division and not withdraw. They saw the value that the US division could bring, but only if Klecan could put in place a coherent operational plan.

Corporate necessity
As a result, draconian steps had to be taken, which included changing the business model, the infrastructure, and some people in various departments. The staff was reduced by about 50%, and Scor sought a qualitative group of individuals and professionals who could cater to the core values of the company. “It all had to change if we were to survive,” Klecan said. “It wasn’t easy in a lot of people’s minds, but corporately, it was absolutely necessary.”

According to Klecan, the rating agencies two years ago informed Scor that they no longer saw the company as troubled. “They were satisfied with the corrective steps adopted for the turnaround,” he said. “We had the shareholder and group support to transition ourselves from being all things to all people, to being exactly what Scor traditionally was: a sound, disciplined, technical underwriting company. And this is what we are today. We’re in a sense of normality now and can proceed forward.”

It took a little more than two years for Scor to turn itself around, but Klecan said it’s a wonderful feeling to sit down with the rating agencies and discuss future business prospects rather than legacy issues.

Rising phoenix
For many years, there were three large professional reinsurers that were well ahead of the class by quite a stretch, according to Klecan. With the acquisition of Converium, Scor is now at the size where it can be viewed as an alternative to those large companies. Taking advantage of that new outlook, the company is rebranding itself within the context of Scor, a rising phoenix from the ashes.

“Scor no longer sees itself as the prey. We want to re-establish ourselves as a market maker versus being a market follower,” Klecan said. “Over the years, Scor has prided itself as being a market maker. We had lost the roadway in that respect, so we’re getting back to core values that had been good to us over the many good years and had sort of been forgotten,” he concluded.