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February 2009
Finding Risk in Opportunity
By Ellison Clary
   For a positive story in a bad economy, look no further than the Charlotte office of Marsh USA Inc. Healthy growth continues in the Carolinas for the world leader in insurance brokerage and risk advisory.

     The reason, says Scott Mercer, managing director and Charlotte office head, makes sense: A recessionary time causes companies to seek more balance sheet protection.

     “They tend to buy more insurance and take less risk,” Mercer says of his corporate clients. “They’ll spend $25 to save $100.”

     The insurance industry traditionally stabilizes when the investment markets are in a down cycle, but then again, there is nothing traditional about this economic downturn.

     “We have a lot of compassion for our clients that are going through tough times.” Mercer cautions from his corner office on the 32nd floor at Bank of America Corporate Center. “We can be part of the solution during tough economic times, not part of the problem.”

     One of the world’s largest insurance brokers, Marsh is the flagship unit of Marsh & McLennan Companies (MMC), a global professional services firm. Both Marsh and MMC are based in New York City. Of MMC’s 55,000 employees, 24,000 work for Marsh, which contributed approximately $4.5 billion of MMC’s $11 billion in annual revenue in 2007.

     The Charlotte office of Marsh also oversees an operation in Greenville, S.C. With more than 100 employees, Mercer reckons Charlotte is in the top 20 of Marsh’s 65 North American locations.

     The company professes to “help transform risk from a liability into an advantage.”

Mercer, a Chattanooga, Tenn., native who’s been with Marsh and a predecessor since 1984, explains how that happens.

     Large corporations as well as middle-market companies need to manage liabilities. They have physical assets such as airplanes and trucks. They have employees. If they are financial institutions, they experience the liabilities of dealing with other people’s money.

     “Most of that requires insurance, particularly in a regulated industry,” Mercer says. “A lot of it is risk they don’t need to take on themselves. It’s just cheaper to insure through a third-party insurance carrier than it is to retain the risk.”

     Marsh does that, Mercer says, but it doesn’t stop there.

     Many firms do keep some risk. A large corporation might self-insure in some areas—perhaps worker compensation—for the first half-million dollars.

     “Where we really add a lot of value is in that retained cost area, where we apply our consultants to help manage the costs of their losses,” Mercer explains. “The more loss they can reduce in frequency and in severity, the better off they’re going to be.”

     Marsh can show a client how to reduce claims. It can advise on how to create a safer working environment. And it can help manage claims when they occur.

     “No claim gets better with age,” Mercer adds. “The longer claims hang out there, the more expensive they are, the more litigious they become. We help clients resolve claims in a timely fashion.”

 

Claims Management a Strength

     “That’s one area where we add so much value, and that’s quite frankly what I think makes us different versus some of our very worthy competitors,” Mercer continues. “It’s the amount of dedicated resources we have in claims management and loss control.”

The Charlotte office has eight people in loss control and 10 more in claims management, numbers Mercer characterizes as “pretty robust” compared to what typical competitors maintain in the Carolinas.

     With clients in more than 100 countries, Marsh often is thought of as specializing in service to Fortune 1000 firms, Mercer says, but only half its revenue comes from those behemoths. The other 50 percent originates with what Marsh classifies as middle market, companies with revenues of $50 million or more.

     Besides Goodrich, notable Carolinas clients include Muzak LLC and Duke Energy. The Greenville office serves BMW Manufacturing, Fluor Corporation and Michelin North America, among others.

     “We have a strong and stable colleague base,” Mercer adds in explaining the firm’s performance for its clients. “Clients like the consistency of dealing with the same people.”

     Top performance is another reason clients stay around, Mercer says, and singles out Dick Oelhafen, South Zone Claims Manager based in Charlotte for personally saving clients hundreds of millions of dollars in claims costs over the years.

     Marsh can benefit after a firm moves a significant presence here. Aerospace and defense giant Goodrich signed on with the Carolinas office in 2004.

     Tim Carter, director of risk management and real estate sales for Goodrich, mentions a recent challenging claim where Marsh “has been absolutely brilliant on working all the issues to get things resolved.”

     Marsh manages more than 70 percent of the world’s aviation accounts, Carter points out. “They have proved over and over they are an excellent broker worldwide as well as on a local basis,” he adds.

     Most of Marsh’s new business in the Carolinas for 2008 came through expanded opportunities with existing clients, Mercer says. That reflects the desire for enhanced balance sheet protection.

     Halfway through 2008, Mercer and his team recognized signs of impending economic downturn. “We saw capital expenditures were being put on hold, funding for new capital expenditures or new projects or new plants was put on hold or shelved altogether. Acquisitions were not taking place.

     “People just started hunkering down,” he summarizes.

     For 2009, Marsh is also hunkering, Mercer says. He’s obviously pained as he mentions the January closing of R.L. Stowe Inc., a stalwart employer in Gaston County for 108 years. The textile firm was a Marsh client.

     Mercer has held recent, in-person discussions with other manufacturing leaders and clients of Marsh. “They’re concerned,” he says with a wrinkled brow. “It’s a tough economy.”

 

Service Sea Change

     Still, Mercer has been in Charlotte long enough to watch the Carolinas economy experience a sea change.

     “We used to serve 80 percent of all the textile manufacturing in this state,” he says. “We did work for Milliken, Burlington, you name it, we did it. That was our forte.”

With the demise of textiles in the Carolinas, that has waned.

     Transportation also was important once for the Charlotte office. It served clients such as one-time trucking icon Carolina Freight, also an acquisition casualty.

     “Our client mix has changed tremendously,” Mercer continues. “It’s now one of financial services, power, energy, retail, life sciences and real estate development.”

     Another strength of the Carolinas operation is public risk management. The City of Charlotte is one of many municipalities in both states that use Marsh.

     “We have to mirror the demographics of the territory,” he says. “We keep a finger on the economic pulse.”

     Marsh does much of that in the Carolinas through connections with banks and the law firms that serve them. It also helps law firms with their own legal liabilities.

     Mercer professes to remain bullish on the Carolinas economy. That’s notwithstanding trouble spots such as real estate development, where he worries about developer friends who are in tight straits.

     “I see the banks still growing, staying strong,” Mercer says. “I see the energy sector really robust in the alternative, renewable energy field. I think that’s going to have a big influence on this area.”

     He cites the Shaw Group, a Baton Rouge, La.-based energy company that had only a handful of people in Charlotte three years ago but now counts about 1,000 here, with a strong presence in center city.

     “They’re not a client,” he quickly adds, “but we know a lot of people over there who are doing work with Duke Energy, so we cross paths quite a bit.”

 

Potential in Energy

     Nuclear specialists in the Charlotte office work not only with Duke Energy but with nuclear power facilities across the country. Charlotte’s Mark Fishbaugh is Marsh’s national renewable energy practice leader and he’s also the client executive for Duke Energy.

     Mercer praises Duke Energy’s positive reputation and the simultaneous development that utility has initiated in both nuclear and renewable energy. He calls energy risk management a “sweet spot” for his office, adding he views it as a strong growth area.

     Now 47, Mercer is doing what he angled for since graduating from the University of Georgia with a bachelor’s in insurance and a focus on risk management, a discipline that fascinated him. He earned an international management graduate degree from the American Graduate School of International Management in Phoenix, Ariz., to better qualify for a position managing risk.

     That job was in Manhattan, with Marsh predecessor Johnson & Higgins (J&H). With J&H, he also worked in Chicago where he met wife Julie. He wrangled a job in sales, which brought him to Charlotte in 1992. The Charlotte office grew impressively and Mercer was anointed senior vice president of sales for the South region. He was firmly footed by 1997, when Marsh bought J&H.

     For a time, Mercer served Marsh as national sales leader, based in Charlotte. He visited most of the firm’s 65 domestic offices. Now, as he runs the Carolinas, he reflects on those visits and is thankful to live here.

     “I’ve been to a lot of towns and I can’t think of a better place than Charlotte, North Carolina,” says the father of two sons and two daughters. “It’s one of these places that, if you want to be involved, just raise your hand.”

     In Charlotte, besides the United Way and the Arts and Science Council, Marsh supports Lifespan, a Charlotte based nonprofit whose vision and mission is to transform the lives of children and adults with developmental disabilities by providing education, employment and enrichment programs that promote inclusion, choice, family support, and other best practices.

     For the past nine years, Marsh Charlotte has hosted Marsh Day, which is their annual day to give back to the community, and for the past five years has partnered with Lifespan. Marsh Day provides Marsh colleagues along with colleagues from sister MMC firms Mercer and Oliver Wyman the opportunity to work hand-in-hand with each other along with partnering clients to complete various improvement projects at their Charlotte locations.

     Marsh employees also donate to a weekly “denim for dollars” kitty in which colleagues donate $5 each Friday to wear denim. Each month colleagues choose a local charity such as the Charlotte Rescue Mission, Charlotte Soup Kitchen, Petey’s Promise or Crisis Assistance Ministry who will receive these donations.

     Mercer is personally involved with Trinity Episcopal School and the Charlotte-Mecklenburg Police Foundation. He’s the new president of the city’s British-American Business Council. It promotes business investment from the United Kingdom to the Carolinas.

     Mercer doesn’t mind if a great many people don’t realize these involvements, just as he’s not concerned that Marsh itself is largely anonymous in Charlotte.

“We’re kind of an unseen part of the real fabric of this community because of the corporate clients we support,” he says.

     “We’re helping our corporate clients make their goals,” he sums up. “We’re helping them manage their risks, which are changing every day. And we’re among the few people with the latitude and the depth and breadth of resources to really address that.”

Ellison Clary is a Charlotte-based freelance writer.
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