Shadow ministers: a little-known group of insurance buyers operates in the shadows of the better-known risk management and insurance trade organizations. This restrictive group, known as M200 for "Multinational 200," shares best practices and trade ideas, without the interference of brokers. Novices need not apply.
Do they succeed? Without a doubt, say the 40 members of the M200, who have just celebrated a major milestone: the completion of their 30th meeting, this time in Boston in November.
Among its accomplishments, M200 members say the group has introduced two industry firsts, albeit none recently: the "multirisk, multiyear" program, eagerly embraced by France's Alcatel; and the so-called "long-term coinsurance program," launched by Asea Brown Boveri in 1993, a program later adopted by M200 member Honeywell and others.
What exactly is M200? It is an unincorporated association, and the smallest, least-known--and, ironically, arguably, most successful--of any risk-related group worldwide.
Its membership of 40 is a who's who of the world's largest corporations, insurers and reinsurers.
M200 doesn't release a membership list either by individual names or even simply by companies. Its members range in size from $10 billion to well over $100 billion in annual revenues and are headquartered in eight different countries on three continents. A wide range of industries are represented. Ten seats are reserved for executives from insurance or reinsurance companies.
It stands apart from the Risk and Insurance Management Society, with its 9,500-plus members, and other risk groups. Key among the differences: M200 never expands beyond 40 members; is an invitation-only group; has a membership divided equally between U.S. and foreign companies; represents only the largest multinationals, insurers and reinsurers in the world; and does not include brokers at this time--and never has.
It also shuns publicity, press releases, lobbying efforts, a public Web site, and the usual mind-numbing public surveys or studies for general release. In fact, most risk managers, both in the United States and abroad, have never heard of M200.
M200 is "virtual" in the extreme. Paper has been banished, and the Internet and telephone are the only means of communication. Critics label the group exclusive--but M200 members don't see it that way.
"It's not true, we're not an elitist group," says James D. Noble, vice president of risk management and insurance at Colgate-Palmolive Co. Members also reject claims that it's a "boys' dub."
Five women belong, including two on its policy committee, one a risk manager and the other an insurance executive.
EXECUTION OF AN IDEA
The group's founder, Herbert Harrell, of Alexandria, Va.-based Harrell Associates, says the idea sprung from an IT-consulting assignment at an insurance company in the mid-1980s.
"I interviewed risk managers, insurers and brokers on both sides of the Atlantic and soon realized that risk management and insurance were neglected and in many ways archaic fields," Harrell says. "There was little serious dialogue among risk managers across national borders or between risk managers and insurance executives not immediately relating to their business relationships."
Out of Harrell's initiation into this quiet, secret world came an upshot. "Some of the people I had interviewed and stayed in touch with had become a working party that tossed around ideas about what could be done to improve their working conditions. From that arose the idea of a 'Multinational 200,' a benchmarking group encompassing the largest European and North American corporations."
Members prefer M200 over other trade associations, although many belong to the 9,500-member RIMS, the 200-plus Risk Management Council of Manufacturers Alliance/ MAPI in Arlington, Va., as well.
"As originally described to me, there were going to be very open discussions and real sharing of information, while respecting antitrust rules, and it has been just that," says Michel Cournier, director of risk management and insurance at Paris-based Alcatel and a founding M200 member.
He found that other organizations just didn't meet his need. "I belong to RIMS but quite frankly haven't been for years," he also says. "M200 is much more valuable."
Other groups have a role, he admits. But they tend to serve those just starting out.
When forming M200, Harrell did consult with the RIM8 president but did not actively court RIM8 board members. "The RIMS executive committee members were by and large not asked to be members, so they did all they could to ignore it," says one member.
Its small size or its differences with other groups cannot explain why M200 members are so loyal--as the numbers demonstrate. On average, no more than three or four members miss any given meeting, Harrell says. Many have belonged for a decade or more.
So what does explain that loyalty--and the group's longevity? M200, after all, celebrates its 15th anniversary in May. It's an adherence to the original goal: to enable members to benchmark their company's performance and programs against that of others in an extraordinarily intimate, no-holds-barred setting, where trust is key and it's understood that whatever's said, positive or negative, never leaves the room.
That veil of confidentiality is key to what gives M200 the "ummph" that other organizations lack.
"M200 was originally planned to be an international benchmarking group of 200 members," says Harrell, "the 40-member group was supposed to be the first step. However, the M200 Forum (the group's original name) proved to be so interesting after the first meeting that we dropped plans for an expansion beyond 40, which would have jeopardized the high level of interaction and open dialogue."
The rub: Expanding would make M200 less intimate--and make it more difficult to build the trust that binds the 40 together.
"The group's size comes down to a logistical issue," says Colgate's Noble. "We don't want to use microphones. Initially we tried that more than once, and people hated it. So the question became, 'What's the maximum size we can have to be reasonably close and still talk to one another across a table?' And you have to remember that not all of our members speak English as their first language. So you have to be close, enunciate clearly and not use a microphone."
INTERNATIONAL IN SCOPE
Worldly, articulate and multilingual, M200 members have tackled a broad array of issues. Among the topics that have been on the table: asbestos insurance; broker compensation, including contingency commissions; benefits in forming a captive; risk engineering; the latest legal developments in Europe and the United States; the ratings systems of A.M. Best and Standard & Poor's; D&O insurance; and, of course, the Spitzer investigation. Hurricane Katrina promised to dominate its discussions at the November meeting in Boston.
Not everyone has shared the same concerns on any given topic--and issues raised haven't necessarily gone where an individual member might have liked.
"I put contingency commissions on the M200 agenda seven years ago," says Good, a founding member and former insurance director at Rohm and Haas. "The basic reaction was, 'Shut up, it's no big deal.' Years later, some members came back and said, 'Henry, you were right about that.' Having said that, there were still a few members who said, 'It's still no big deal.'"
When they say "benchmarking," Harrell and the members aren't talking about statistically valid studies filled with numbers, ratios and percentages--far from it.
"The whole idea is that we have access to this small group of talented people, that we can benchmark what we're doing," says Colgate's Noble. "We get a litmus test of what other people are doing globally, how they're structuring things. In effect, we're trying to get at best practices, the information that will tell me if I'm right on with a program or way off."
"This is a peer-to-peer group," Noble concludes. "But bigger than that in importance to the members is confidentiality, the fact that we have trust among us, that things that are said will not be passed on to other people."
"The original idea was to get buyers and providers together without constraints," adds one of the insurer members. "These are the people actually doing the deals without the intermediaries involved. It's a very open, frank, unmasked exchange of thoughts, criticisms and proposals."
And that's the real beauty of a gathering of such peerless insiders, he says.
"Managers can critique something and say, 'I'm unhappy with this.' As an insurer, it's extremely helpful to get feedback about performance."
Paul McDonald, director of risk management at BAE Systems, benefited almost immediately from M200's wherewithal when he joined the group. A couple years ago, BAE decided to benchmark how a lot of its corporate functions were doing relative to other global companies, and M200's feedback was crucial.
"Now within BAE, we've been held up as an example of how to go about this benchmarking with other head-office functions," McDonald says.
"We started our benchmarking of risk management because BAE was very mature and felt it was the right time to challenge its internal structure," he says. "What I was doing there was looking at the role, the size, the interplay and scope of the respective teams of other companies."
He recalls tapping into the membership of the Association of Insurance and Risk Managers and the resources of the Institute of Risk Management. But it was the members of M200 who had greater compatibility with the global nature of his employer's needs.
"This was very informal, but in informality there's a lot of detail in scope," he says. "We haven't made too many changes, but there has been fine-tuning. I had a conversation about this very recently. It's still a work in progress."
Asked what they've accomplished over the years, members have widely varying responses. Members can be equally happy with both small and larger achievements.
"Have we come up with a fantastic new product out of M200?" asks an insurance executive member. "I'm not really aware of one, but it has triggered further investigation and development. D&O has been an important area of focus. I wouldn't say we've been a pot boiling with all these new ideas."
Sometimes the small achievements or improvements are enough to satisfy members. "I always come back with half a dozen items I will pursue," says Paul Morrison, director of risk management at Emerson Electric in St. Louis. "These are microtype issues as opposed to macro. As one example, because of an M200 meeting we decided to look at new brokers and added Lockton."
Good says the group's influence on the insurance industry has exceeded any impact it's had on the risk management community at large.
"I would say we've had little influence on the risk management profession because we don't deal with it. Most risk managers have never heard of M200," he says. "On the other hand, we've brought strong influence on the insurance companies because they've really been able to find out what risk managers at large companies want.
A LOOK TO THE FUTURE
Asked how M200 is changing over time, members come back with a more unified answer in terms of its original mission--not at all. Benchmarking remains its primary raison d'etre. But in terms of membership, M200 is dynamic.
"The group has changed dramatically," says Noble. "In pure concept it hasn't, but companies are consolidating, people are retiring or no longer in their positions, so there's a very significant change in membership."
Whereas Harrell once recruited all new members, that hasn't been the ease for several years. Today its seven-member policy board does much of the recruiting and vetting. That may be a sign that identifying "the best of the best" is becoming more difficult for a group that doesn't encourage membership inquiries from outsiders.
"As the policy board has gotten more involved, I said to Herb, 'You still have the icons but they are much harder to find. Other risk managers know some of them but they're difficult because most large corporate risk managers are not active in RIMS,'" says Good. "Our broader policy group serves on the advisory boards of other companies; they're the ones who are able to come up with potential names."
One major result is that the average age of members is also coming down. "I'm not saying that's bad," says Good, who notes that "the icons are probably all in their 40s or 50s."
But as new members arrive, it takes time to get to know them, Noble says--and more importantly, open up to them. "There's so much confidence tied into being able to talk to our members," Noble says. "I'm a little bit cautious about talking with new ones until I'm sure sharing confidential information isn't going to be a problem."
Another question for the group's future is its international presence. M200 has always been proud of having 50 percent of its membership abroad, and in recent years has started making a concerted effort to expand beyond Europe.
Today, it has members from Mexico and Hong Kong, and has had one from Australia in recent times as well.
"For a number of years, we've been trying to expand into Latin America and Asia, but until recently it was hard to find risk managers representing global companies in the Americas," says Good. "In Asia we have the same problem, other than in Japan and China. But even in China, the career's only been evolving over the past couple of years."
The question is whether Asians will attend M200 meetings, says Noble.
"Our Australian member had to pump iron to get to us and in fact did attend every meeting," he says. "So we have a desire to have them, but if they have to come from Singapore, that's pretty difficult. The trick is getting them to meetings and finding them because they're not well-known."
But when all is said and done, 15 years after the group's founding, members say they're satisfied with who they are and what they're doing.
"We're not a lobbying group, but I think we bring influence and some conviction that good ideas should survive," says Alcatel's Cournier. "When our ideas are great, we have the influence to make it possible for them to become reality."
RELATED ARTICLE: M200: more than just a talking shop?
Under the long-term coinsurance program established by M200, members created a layer of coverage for their most crucial insurance need by accessing the net capacity of insurers and reinsurers. That way, corporations weren't subject to the ups and downs of the insurance and reinsurance markets.
These companies, such as Asea Brown Boveri, got the guaranteed, although pricey, coverage they sought.
"We ran this program for seven years until the market fell apart and regular insurance became so cheap," says Paul York, the M200 founding member who put the program together while at ABB as vice president of risk management. "It was expensive--you pay for quality--but we gained double-A and triple-A credits as a result, and it was well worthwhile."
M200 members agree there's no reason successes like these can't keep on coming as long as the group retains the meeting format it has had from the get-go--and continues to both limit the total size of its membership and keep a close eye on whom it admits.
"The M200 was an instant success--and remains so," says Herbert M. Harrell, 60, the group's founder, who has no formal title but runs M200's day-to-day affairs out of his Alexandria, Va.-based offices as a "consultant" to the group. "It took blood, tears, toil and sweat to get the M200 going; before it existed, it was beyond most people's power of imagination," he says.
Most members of M200 are no less passionate. "There's no question that we've had a positive influence on the risk management profession and insurance and reinsurance marketplaces," says Paul McDonald, director of group risk management at London-based BAE Systems and a member of M200's policy board. "That's because wherever you look around the world, we have a core of individuals who are advocates for best practices. In some ways we're pushing the boundaries for the insurance model."
"In the end I would prefer to focus on M200 rather than other risk associations and groups," says James D. Noble, vice president of risk management and insurance at Colgate-Palmolive Co. in New York. "In terms of logistics we feel it's more global."
--Lawrence Richter Quinn
LAWRENCE RICHTER QUINN is a writer in Washington D.C. He can be reached at email@example.com.
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|Author:||Quinn, Lawrence Richter|
|Publication:||Risk & Insurance|
|Article Type:||Cover Story|
|Date:||Dec 1, 2005|
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