Building a legal team
Since joining CNA Hardy eighteen months ago, Phillip has restructured and significantly expanded the size of his team. Although many companies are hesitant about bringing lawyers in-house, Phillip has no doubt that “it is more cost effective to have lawyers on-site in terms of both
1) annual salaries being significantly lower than external firms’ hourly rates and
2) service delivery in terms of understanding the business better, closer interaction with colleagues and consistency and continuity of advice.”
In fact, the cost of legal at CNA Hardy has significantly decreased since 2014 whilst the volume of legal enquiries dealt with has at least doubled each year. “We have achieved this through optimisation. Reviewing and reducing the number of external advisers generating external spend and increasing the number of lawyers internally to reduce the workflow.” says Phillip. The secret is to thoroughly review figures, plan and hire the right lawyers for your team in terms of skill-set and personality.
There is a perception that legal teams are there to prevent business being done. However, Phillip says this can be “overcome by being part of the business, not separate from it. In addition, you need the ability to produce real tangible data and metrics, showing that we are contributing to the bottom line in a meaningful way. Money saved due to expense reduction is as valuable if not more valuable as money earned. And the liability mitigated or avoided can be hugely significant in terms of actual losses and reputational consequences.”
Being a General Counsel
A General Counsel will often be part of the company’s Executive team and therefore will have input in the general strategy and direction of the business rather than simply delivering the output of a team. General Counsels, like Phillip, may also be responsible for other teams apart from legal such as Product Development, Company Secretarial and Compliance. Phillip reckons that what makes a good General Counsel is not necessarily technical legal ability but also the ability to:
- manage and motivate a team;
- be a good business person, understand the strains and metrics of an organisation and contribute to its success;
- empathise with requirements of other function and deliver the best outcomes; and
- look for marginal gains, constantly looking at things to tweak and make small efficiencies and improvements that add up to large ones.
Being a General Counsel doesn’t come without challenges. The biggest one according to Phillip is “the reconciliation of being a business facilitator and enabler, i.e. helping deliver the objectives of the business and profitable growth at the same time as risk management and prevention of liability or financial exposure.”
In the insurance sector in particular, this is further complicated by the complexity of governing regulations and navigating their interpretation. In the UK, companies have the PRA, FCA and Lloyd’s and for international businesses like CNA Hardy also the requirements of overseas regulators including the state of Illinois, MAS in Singapore, CIRC in China, FINMA in Switzerland.
The future of in-house legal teams
Although insurance companies are growing their in-house legal teams given the cost reductions, more efficient service delivery and better internal relationships which come from having such teams, the need for external counsel continues. Phillip believes “there are certain matters of technical specialism that aren’t practical to resource in house or some things where the volume of work (a large acquisition) or potential exposure (large litigation or regulatory investigation) where you would want external support.”
In-house teams have strengthened over the years and there is no doubt that lawyers in private practice are increasingly considering making the move in-house. In-house teams have become more sophisticated and attract some good quality candidates. In addition, salaries are often equivalent between inhouse and private practice up to the 5 year PQE level and worklife balance tends to be better.
Brexit
Most companies are unclear as to what extent the Brexit vote will impact the market and are having to make preparations based on whether or not passporting rights will be kept.
CNA Hardy, for example, has six branches in Europe and also transacts on a freedom of services basis. European business represents 25% of its business so if they no longer have passporting licenses they will need a solution.
Phillip and his team have been actively working on a contingency plan to prepare for the loss of passporting and are well positioned to ensure business continuity and certainty for CAN Hardy’s employees and customers. Phillip says his contingency planning is well underway and he has also visited all CNA Hardy’s branches in the EU to explain this and reassure its employees.
In addition, Phillip has met with his counterparts in the London market and he says that “companies are preparing contingencies, which may include the establishment of a new subsidiary in an EU country to continue to transact business. We are ahead of most in this regard, having already visited certain regulators in Europe to ascertain the best location for us. We have a company platform as well as a Lloyd’s syndicate and therefore are also speaking to Lloyd’s about their solution for the market. In addition, lobbying to retain passporting will take place through various market bodies.”
Insurance legal recruitment
The past year has seen the highest level of M&A activity in the insurance sector in more than a decade with companies looking to save costs or secure a larger seat at the London insurance table. Changes of this scale usually shake up the market and indirectly result in an active period of recruitment.
The majority of the roles have been in the corporate/ commercial sector and the Lloyd’s Syndicates, who have previously relied on external lawyers, have particularly been looking for these types of candidates to save costs. The claims teams have been recruiting heavily as in previous years, often taping into their pool of secondees from private practice firms. Finally, data protection has become a skill in-demand within insurance companies due to the impending implementation of the General Data Protection Regulation by 2018.
It is hard to tell what the next year will bring in terms of recruitment but Brexit and increasing complexity of regulation may require more legal advice. However, in a very soft London market there is expense strain which can be an argument both for and against legal recruitment.
Phillip reckons there will be an increased demand for regulatory lawyers and corporate lawyers in the context of Brexit and market consolidation. Product development needs should also increase in terms of creating new proprietary insured products as companies like CNA Hardy seek to be innovative market leaders in harnessing change for profitable growth.