Jeremy Lee and Sarah Bennett talk to John Coomber about his career and time as CEO at Swiss Re, his philosophy on leadership and how he thinks actuaries can apply their skills to wider areas of public interest
John Coomber retired as group chief executive officer of Swiss Reinsurance Company of Zurich in December 2005, following 33 years at the world's leading reinsurance company. Today, he serves as a board member of the Swiss Re Group, is chief executive officer of Pension Insurance Corporation (part of the umbrella group Pension Corporation), chairman of Mactavish, chairman of The Climate Group and chairman of ClimateWise. He is also a member of the Deutsche Bank Climate Change Advisory Board, a Fellow of the Institute and Faculty of Actuaries and an Honorary Fellow of The Chartered Insurance Institute.
Tell us about your journey from actuarial student to CEO of a global reinsurance company
I became an actuary as a matter of convenience really: I wanted to get married and in those days insurance companies provided mortgages for staff. I'd worked with Phoenix in a holiday job and they offered me a permanent role after I graduated as an engineer.
I got married and two years later moved to Swiss Re. That was a big change. At Phoenix, you were part of a larger process. When I joined Swiss Re there were only 10 of us in life, so we had to think about the whole business. At one point, I was in charge of pricing, reserving and underwriting - not good practice these days!
I was lucky to have various opportunities at Swiss Re. It was helpful that life insurance was a booming enterprise in the 1970s, as I started.
And your other roles?
My role at the Climate Group is a charitable one. I'm currently in my seventh year as chairman of trustees; we are searching for a new chairman.
ClimateWise is an association of insurance companies trying to find a role in protecting the world's climate systems through moving towards a low-carbon economy. Swiss Re plays a very active role in this organisation, so I was happy to represent Swiss Re in the role of chairman when the vacancy arose.
Being CEO of Pension Corporation is an unintentional career step. I retired from Swiss Re and their board kindly invited me to become a member. The chairman asked me to take up the Swiss Re seat as a non-executive director of Pension Corporation. This progressively expanded into an executive role and I now work there four days a week.
You sound very busy
I have a lot more spare time now than when I was at Swiss Re. The secret in any job is to surround yourself with extremely able people. I've always been fortunate in this respect and it's very much the case here at Pension Corporation.
How does being CEO of Pension Insurance Corporation compare with that role at Swiss Re?
There are few differences in the qualities required to lead an organisation. For people to follow, you have to put forward a direction of travel to which they can aspire and you have to communicate in a way that embraces their emotions and their talents. But there are major differences in the scope of the roles. Swiss Re has higher complexity in its business and a global reach. At Pension Corporation we have a very simple business model: one country, one product and basically one risk, asset risk (we outsource most longevity risk).
You were the first non-Swiss CEO of Swiss Re. How important is diversity in the boardroom?
I'm absolutely in favour of diversity, including diversity of talents. Seeing things through different eyes is extremely beneficial and creates challenge. Would I enforce it? For a global company you've got ask yourself why you wouldn't have people from different parts of the world on the top management board and main board. I think it should be enforced.
At Swiss Re you worked in both the life and health and the property and casualty businesses. Is there value in a composite business?
For reinsurance there is value - it's a very mathematical business. We are interested in how to aggregate risk on the balance sheet for diversification effects. It's also always interesting to think about one business through the lens of the other, for example we are brought up to believe property and casualty (P&C) is a short-term business and life and health (L&H) a long-term one. Maybe there will be a world in the future where we give prices for hurricane risk for 10 years, or maybe we'll see some personal protection products that are more short-term renewable.
Might we see Pension Corporation taking on different risks to help diversify its balance sheet?
We have a very interesting market place with huge untapped potential. We could get diversification benefit from writing mortality risk, but we would also get business complexity, compliance complexity and cultural issues. So, I never say never, but it would be a big step.
So what is the future for Pension Corporation?
Since being in top management at Swiss Re, I have gained a deeper understanding of risk. In a young company, such as Pension Corporation, it is important that we can set sensible risk appetite and good working practices for managing the risk in a period of growth. Rapid growth is one of the most dangerous activities for a company. So my job is to make sure we get the growth without any related bad experiences.
What would you describe as rapid growth?
Growth is a function of two things - your ability to grow market share, and growth in the size of the market. In China, for example, insurance premiums are about 4% of GDP, compared with, say, 8% in the United States. So you can quite easily see potential for the insurance industry there to achieve double-digit growth, with a combination of insurance penetration increasing as a percentage of GDP added to high single-digit GDP growth.
In developed countries, this level of growth does not come through just rising with the tide, it must come either through taking share from others or finding a completely new sector. Bulk annuity pensions insurance presents an opportunity for the insurance industry to provide a solution and to achieve growth that is independent of the growth of GDP.
What are your views on the difference between pension and insurance regulation?
The reserves of an insurance company will almost always exceed the target funding of a pension scheme - so there is a cost of transfer. But it can be a cost worth paying because the insurance industry has the benefits of scale and risk management. So, to me, it's moving a promise into a safer environment.
The management of risk through pooling is important to society. I do welcome the direction of travel in regulation during my 40-year career, particularly for consumer protection, but also in the risk focus for prudential regulation. However, I wonder whether we could now be moving towards a point that is beyond the efficient frontier for regulation. I worry that regulations like Solvency II and the Retail Distribution Review might make it harder for insurers to take risk or harder for an individual to find an insurer. So individual risk owners might be left with the problem of managing their own assets or companies might retain more property risk than they should because the premium will be too high.
Talking of serving society, how can insurance companies help counter climate change?
When I became CEO of Swiss Re, I considered what I thought were the three major risks facing the world: climate change, demographic change and terrorism.
The most threatening of these is climate, as it is irreversible. We know that the farming belt could eventually be in the wrong place, ice is going to melt and the sea levels will rise so our cities will be at risk. We need to move towards a low-carbon economy to control emissions*.
Through ClimateWise, I have set out three areas where the insurance industry can help. The first is to help energy companies find ways to manage the risk of moving to low-carbon solutions. The second is modelling and educating on the financial implications of tail-risk scenarios for weather events. Lastly, we should use our skills in risk to advise on how to protect crops and communities that are threatened by extreme weather events.
Are there any other areas where you think actuaries could better use their skills?
Actuarial training is good preparation for modern management as it emphasises the importance of being broadly competent in your subject. In the exams, one has to learn the whole subject to give a reasonable answer. The CEO of an insurer today is expected, among other things, to have a breadth of knowledge across the whole business.
We've started to use the phrase 'risk appetite', yet my perception is that for most companies this has, by marvellous coincidence, landed exactly in line with their current business model - it has not been a challenging use of the science available to us. Actuaries could do more to help companies frame their appetite for risk and understand risk combinations involving assets and liabilities.
What advice would you give to actuaries as they progress through their career?
Knowledge is the best basis for taking decisions. Always keep the interest of the end customer central to your thoughts.
In terms of personal development, I was something of a fixture at SIAS meetings and I used to attend a reasonable number of Institute meetings. I found that very beneficial - partly to make me think about issues of the day but also to share ideas.
We also need some imagination - a little bit of sparkle goes a long way. It is good to develop interests apart from the exams.
What do you do to relax?
I spend a lot more time with my wife. We like walking and listening to music, notably opera. I intended to play golf, but I'm about as good a golfer as I would have been an engineer! I also like to bake a pie - I did that last Sunday for the family.
*ClimateWise's Thought Leadership article on applying insurance principles to climate change risk can be downloaded at www.climatewise.org.uk/issue-one