PRMA’s Risk Ready Podcast, Featuring PURE Insurance CEO Ross Buchmueller

Ross Buchmueller on the reciprocal model and managing risk in today’s hard market

In a conversation with Spencer Houldin for Private Risk Management Association's (PRMA's) podcast series, Risk Ready, Ross shares his thoughts on the lessons he learned from industry legend, Hank Greenberg; the power of the reciprocal model and when it works best; navigating the current hard market; and future proofing the high net worth homeowners insurance industry.

The Q&A

SH: You worked for Hank Greenberg, who I think everybody would agree is an industry legend. What did you learn from him that you've taken throughout your career?

RB: The one thing I think it would be interesting to share is that today people think about purpose-driven companies... AIG existed to increase the velocity of the global economy to let people take risks so commerce could happen around the world.

[Following 9/11,] commercial air travel had stopped completely and there was just too much uncertainty about risk... Hank raised $850 million to backstop the risk associated with commercial air travel and got commerce flowing again. And I watched the way he rallied people to say, “This is our purpose.”

At the end of the day, a company who prides itself on having a strong sense of purpose then has to step up when needed. There's so many things I learned... but probably nothing more profound than watching how purpose guides an organization, particularly on tough days.

SH: We had conversations back in those early years about your passion and commitment to launching something that was unique in our space: a member-centric company. Today, 17 years later... I have to believe you're still passionate about that business model versus a traditional model.

RB: Most certainly. But, I would like to clarify a bit... I think the model clearly gives us a structural advantage on everything from the cost of capital down to the application of taxes. But, VJ Dowling did a great study recently about how since PURE started, dozens and dozens of reciprocals have popped up. [This study] essentially reminds us that if you have a really good business, a reciprocal can make it great.

SH: PURE was purchased by Tokio Marine Holdings, the largest insurance company in the world with an incredible reputation. Does the acquisition change any of that?

RB: The financial strength that is afforded to PURE members as a result of Tokio Marine promising to stand behind the reciprocal is a pretty big deal. I think more practically the stuff that you don't see is Tokio Marine is viewed as one of the best managers of risk in the insurance industry.

SH: Let's dive into that a little bit more: managing risk. You really have stayed very stable in most markets. Could you touch on how you're doing that and how you're continuing to take the blows, but still serving the member?

RB: The stability you're talking about has to be really intentional. You have to look long-term, and you have to be disciplined. Reinsurance is certainly more expensive and it's a factor, but your first thing you should do is not take on too much risk... Right now we're viewing this hard market as being permanent. If it turns out someday that reinsurance capital is cheaper, we may change our view a bit, but it's a lot better to go and say it's never going to get better and can I live in this environment? And the answer is yes. We can.

SH: You have a reputation of looking long term. As someone like myself that's running an independent agency, what should I be thinking about 5, 10 years from now?

RB: Well, I'm not sure you're going to like my advice for you... I think there's a real simple math problem... Rates are going up, values are going up and the proportion of the dollars that go to brokers is going way up. I think it's going to be hard to sustain that forever.

SH: Let's turn to PRMA. You were the driving force behind the establishment of PRMA and those who were newer to the organization may have no idea. What advice do you have for the newer members of the organization?

RB: We have an expression within our walls that, you know, sometimes people would say, “Don't bring me problems, bring me solutions.” And instead, we'd say, “Bring me the problem.” If your staff could bring you problems and you knew what was going on, you could help solve them. Don't stop or be afraid to raise questions or to wonder if it could be better, because that's the only way we as an industry, or PRMA as an organization, gets to its full potential. Keep tapping into that curiosity.