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Challenges and Opportunities Ahead
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I joined The Council 32 years ago as vice president of government affairs. Ken Crerar had only recently taken over the role of CEO and hired me to fill his old job.
After all these years of working with and for the marketplace winners in insurance brokerage, I feel like the luckiest guy in Washington: I became the organization’s new CEO on July 1, succeeding my mentor and friend Ken, who now becomes executive chairman.
But I’ve been the lobbyist for this association for a long time, and the lens through which I view my leadership role will always be informed by my work in public affairs and advocacy. While much has changed in politics (mostly for the worse), some history will repeat itself—opportunities for both good and bad in the public policy arena impacting the commercial insurance industry. Our intent is to prevail.
The big one (Boomer alert: Think Redd Foxx in Sanford and Son, clutching his chest and looking toward heaven: “This is the big one! I’m coming, Elizabeth!”) certainly will be tax legislation next year—irrespective of who is president or which party controls Congress. Many of the provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) will expire at the end of 2025, including the hard-won 20% tax cap for pass-through insurance brokerages (two thirds of Council members).
The TCJA took the maximum corporate rate down from 35% to 21%, and almost everyone thinks that rate will rise—even though it theoretically is permanent because it does not automatically expire. (Congress would have to act to change it.) The pass-through 20% rate expires at the end of the year. So even if Congress does nothing, it will expire and rates will dramatically increase for many Council firms.
Private-equity-fueled brokerage firms took a haircut in the TCJA (now able to write off only EBIT in acquired firms, not full EBITDA), but it certainly didn’t slow down PE, especially in the commercial brokerage space. Private equity will come in for additional scrutiny next year.
The Council has fought legislative battles before and knows how to win.
This association invests heavily in representation on Capitol Hill (and, when necessary, at the state level). In the early 1990s, court cases jeopardized the ability of agencies and brokerages to depreciate intangible assets. We fought back and won a 15-year intangible depreciation law in the Tax Reform Act of 1993.
Likewise, we almost single-handedly won major provisions in the 2010 Dodd-Frank financial services reform act that rationalized the surplus lines marketplace by establishing a single set of rules for accessing the market (and paying taxes) for multistate placements. Had we not won this, would the E&S marketplace have doubled in the last decade amid the unrelenting hard market?
I’m proud of these and many other wins, and just as proud of a number of items we defeated. (A brokerage compensation regulatory authority at the Department of Health and Human Services? A ban on contingent commissions? Brokers having to report racial data to the Department of Housing and Urban Development? No thank you to all of these.) It’s easier to beat stuff in Congress than it is to pass stuff.
With the day-in, day-out of lobbying in my rear mirror and a great team in place, I have wonderful opportunities to build on the incredible foundation that Ken (a serial entrepreneur) built. As much as our member executives care about the regulatory environment, the universal number-one concern is talent development. Our leadership programs are best in class, and my goal is to broaden their take-up and deepen our on-demand offerings.
For 111 years, The Council has hosted the most prestigious international gathering of the commercial insurance brokerage industry: the Insurance Leadership Forum, held every October. Our Employee Benefits Leadership Forum is likewise growing, reflecting the market clout of Council firms. We don’t need these forums to get bigger, we can only look to out-do ourselves every year in quality.
As I write, we are in the 26th consecutive quarter (not month, quarter) of a hard commercial marketplace. In the benefits space, we don’t use the same hard-or-soft terminology, but no employer would say health insurance costs are easing up. Meanwhile, despite an easing of M&A activity in 2023, the multiples being paid by acquiring firms are as high as ever, and pipelines are full. These are exciting, and challenging, times for the commercial insurance world.
It’s often said that no one, on their deathbed, says “I wish I’d spent more time in the office.” I’m stealing the observation of one of our Board members a couple months ago, who challenged that adage, and I agree with him. My Council family—work colleagues, member executives, and employees—are very much part of my family. I admire them. Our members’ products are critical for society and the economy, and they relieve suffering for millions.
I’m only the third CEO of The Council in 66 (!) years. I have no aspirations to work for decades more (Hank Greenberg, I’m NOT looking at you!). But I sincerely want to do right by this industry and the clients it serves. And I’m excited that as good as this association is, it can be even better.