Risk Management

After 42 Years with One Company, a Retiring CFO Reflects

Jeff Burchill, FM Global's finance chief since 1999, has seen the property insurance industry and the role of CFO mature and gain complexity.
David McCannNovember 23, 2016
After 42 Years with One Company, a Retiring CFO Reflects

One day, Jeff Burchill answered a want ad in the newspaper for a job with a property insurer, Protection Mutual. It was October 1974. Gerald Ford was president, Bill Gates and Steve Jobs were 19, the Dow Jones Industrial Averaged closed the year at 616, and the price of gasoline in the United States averaged 55 cents per gallon.

Burchill, fresh out of school and a short stint with Continental Bank in Chicago that started when he was still a student, got the job. A mere 42 years later, Burchill retired this month as CFO of FM Global, which was formed by the merger of Protection Mutual and three other property insurers in 1999. After leaving the bank, he never again switched employers.

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Burchill was FM’s first CFO, and until now, he’s been the only one. His internal successor, Kevin Ingram, has already taken the reins, and Burchill expects to wrap up a short transitional period by year-end.

Now 64, he says it wasn’t an easy decision to walk away from “a very successful company with a great leadership team, employee, and customers.”

At the same time, he compares realizing it was time to leave to a bottle of fine wine: “You know it when you see it.” He adds, “You want to do this when you’re healthy. I’ve seen a lot of my CFO colleagues get to the point where they were overly stressed and had health issues. I wanted to retire at a point in time when I could enjoy my family and outside interests.”

Jeffrey Burchill

Jeffrey Burchill

The hardest thing to do, he’s starting to find, is turn off his brain. “That takes a lot,” says Burchill, who has written articles for CFO on insurance pricing, supply-chain risk, cybersecurity, the perils of neglecting plant equipment, and climate change. “Today you’re basically available 24/7 by phone, Internet, social media, and whatever. Twenty years ago if you retired, you walked away from a telephone.”

CFO recently chatted with Burchill about his career, the company, and the property insurance industry. An edited transcript of the discussion follows.

Being with one employer for your entire career has interesting dynamics. On the one hand you know the company immersively, down to the last detail, which can help with decision-making. On the other hand, you don’t get the experience of working with diverse companies, which can also help with decision-making. What’s your view?

It’s been a challenge for several years now. When I was named CFO in 1999, FM Global was a much different company with a much smaller footprint than it has today. One of the secrets of any CFO is to surround themselves with very successful people with a vast array of knowledge. We’ve been able to do that here. It’s brought diversity of thinking and also creative thinking as we expanded that footprint, [took on increased] responsibilities, and dealt with the regulatory environment we’ve had to respond to.

Thinking back to when you first joined the company in 1974, how has the property insurance industry evolved over that time?

The industry doesn’t look anything like it did 40 years ago. Or much like it did 20 years ago. The biggest change I’ve seen in my career is the regulatory environment, with the government trying to oversee the financial service industry.

For us it really started way back in 1989 with Hurricane Hugo. Then there was World Trade Center disaster in 2001, with all the litigation that fell out of that. There was skepticism about the integrity of the industry.

We’ve had to respond to that; I think we have. If you look at the property insurance industry, we’ve never denied or defaulted on claims. And there are safety nets in place so that if a company is liquidated, its obligations to policyholders will still be satisfied.

The industry was also brought into all the regulation that followed the economic recession of 2008-09, yet the insurance industry still did not default on any of its responsibilities. One company got in trouble, but that was from the investment side, not the insurance side.

I think the industry has responded fairly well as risks have evolved. There is cybersecurity insurance. The supply chain is another new risk that the industry has responded to in an environment of increased regulation.

How about changes in the role of the CFO since you became one in 1999?

The biggest change is, again, regulation. Regulators have increased the amount of detail they ask for as well as the frequency of it. They’re asking us to identify capital by line of business, something that hadn’t been done before. That’s actually an advantage to FM Global, because we’re a monoline company, but we have to do a lot of analytical detail to measure loss exposure and risk against that capital. Going forward I think the industry will be much healthier because of that.

But I don’t know if that’s a skill so much as just a time commitment. I think the skill set we’ve developed over the last 15 years [at FM Global] is operating as a global company. So we’re continuously watching the other economies and political events that might affect either regulation or currency movements, that were not factors 15 years ago.

I had two advantages in my background. One, in my first job out of school I was in international banking, so I was familiar with currency movements and how to hedge currency. And for a time prior to the merger [that formed FM Global], I was involved in the company’s international operations. That benefited me tremendously in my career.

Can you identify a high point in your career?

It would have to be the formation of FM Global. Not many CFOs are at the controls when you go through a consolidation of that magnitude, merging four insurance companies into one. It was certainly a challenge and not something I would wish on my brethren, because it’s very painful and a lot of work. It’s very rewarding once you get past it, but there were a couple years of long hours and a lot of stress.

Was there a low point?

September 12, 2001, because it’s the only time in my career when we had losses that we had not measured. There was a big scramble on to see the magnitude of them. It wasn’t a planned-for, foreseen event, or a modeled event as we call it today. There was a lot of stress involved in that, too. We lost four of our employees.

On September 11 I had actually walked across the street to a Wal-Mart and bought a TV with rabbit ears. There were probably about 200 people in my office watching the events unfold.

What are the distinguishing features of being the CFO at a property insurer?

You work for a risk transfer company, so you’re assuming risk every day, and that has a lot of tentacles to it. One is that you could have that kind of event, whether it’s the World Trade Center or Hurricane Katrina or Superstorm Sandy, that could instantaneously change the cost of your product and your earnings trend. You have to be calm and manage the process and not panic in any way.

Where does the industry stand with its growth curve on understanding cyber risk? It seems almost impossible for companies to stay ahead of the cyber criminals.

It’s probably the biggest risk that we’ll have to adjust to as an industry. Not only is it becoming a more prevalent event, it’s a more international event, where there’s risk from forces outside North America. Hackers’ targets are changing; at first they were going for personal data like bank accounts and social security numbers. Now they’re getting into corporate America, they’re trying to influence the banking system and elections — all kinds of things that are on a much larger scale than personal attacks.

We’ve had coverage in our policy for several years where if a client gets hacked and suffers physical damage, that is a covered peril. We’ve taken that a step further in the last or two. Now we also define data as property. So if a company is hacked and loses data, that is also a covered peril under the policy.

And I think that kind of product will continue to evolve. Cybersecurity is one of the most talked-about topics in boardrooms and C-suites, so any company that can get ahead in the market and offer a product that is the best available will certainly have an advantage.

FM Global has a nontraditional business model for a property insurer, whereby risk and premiums are determined by engineering analysis as opposed to historically based actuarial calculations. The idea is that property losses can be prevented or mitigated. How important is that model?

I think we’re more aware through our engineering and our research on potential risk and loss profiles than any company in the world. That’s what distinguishes FM Global. When people ask me about working for an insurance company, I say I do, but I also work for a scientific research company that tries to and does prevent loss.