Since his appointment in October 2007, Neil Hodges ;has ;been reviewing Zurich’s legal function. The day we meet, the new-look legal department is being put into operation for the first time and Hodges is relaxed about the shape of his practice.
Hodges succeeded James Butler as Zurich’s UK general counsel at a point when the role was changing. Butler had previously been responsible for both the company’s legal and compliance structures. When he retired, UK chief executive Guy Munnoch and European general counsel Rochus Gassman decided to split the roles to give the general counsel greater control of his department.
“I gave myself three months to look at what we needed to do and where changes needed to be made,” says Hodges. “We have very good lawyers in the team, so this was much more about flattening the structure. Philosophically, I believe in flat structures: it helps with escalation and delegation.”
There are five ‘pillars’ to this flat structure: litigation, headed by Teresa O’Connor; distribution, headed by Michael Ginn; corporate and commercial, where Hodges is still trying to fill the team leader role; life insurance, based in Swindon; and general insurance, based in London.
“The last two – life and general insurance – are two key business areas,” says Hodges. The two legal divisions, which work on a pan-European level, deal specifically with product propositions, legal risks and legal support to all teams working within those fields.
In addition, Hodges explains that Zurich UK operates alongside its European counterparts on a “European shared services structure”. Effectively, this means the legal department, compliance structure, finance operation, auditing unit and HR have a common European goal. On a European level there is a system of ‘matrix reporting’, which sees Hodges reports to EU general counsel Gassman.
“We’re one of the larger functions within Zurich,” says an enthused Hodges. “There are rightly expectations on us to progress how we work. I want us to be a dynamic part of the European legal function. Besides anything else, it creates career opportunities for our lawyers.”
Just as the in-house legal structure is divided between UK and Europe, so is Hodges’ use of the legal panel. In the UK the insurer has a longstanding relationship with Beachcroft and the firm sits on Zurich’s general insurance claims panel. Bevan Brittan is used predominantly for life insurance work, while Pinsent Masons, Hodges admits reluctantly, is “used less”.
On an international level the financial services company will make use of heavyweights CMS Cameron McKenna, DLA Piper, Herbert Smith and Freshfields Bruckhaus Deringer to handle a myriad of work. However, Hodges says he prefers to keep the bulk of the work in-house, where he can keep an eye on things.
“We keep a lot of work in-house. It’s cheaper, has the advantage of creating a corporate memory and gives continuity in our approach,” he states. “Going to external counsel means leakage, and that’s not a model which is desirable.”
It seems that in the coming year Zurich’s panel firms will be expected to prove their worth. “This year is all about focusing on what those relationships mean to us,” says Hodges, in a not so thinly veiled threat. Many composite insurers are bringing the bulk of their legal work in-house in an effort to save on legal spend. The sector is anticipating a downturn as the credit crunch begins to bite, and cutting legal spend, at least in the non-claims arena, will undoubtably be attractive.
This initial review will be a precursor to the next official panel review, which is due to take place in 2009, and will examine how Zurich works in relation to its panel.
Culturally, says Hodges, insurance differs vastly from banking, where he was a stalwart of Barclays’ legal department. “It’s the most surprising thing about my move,” he states. “You have to understand the culture of insurance and adapt to the different business model.”
Nevertheless, he seems to be enjoying himself at Zurich, and if he is able to create a legal function to emulate that which is enjoyed at Barclays, Hodges will have one of the most sophisticated legal functions in the UK insurance industry.
Name: Neil Hodges
Position: General counsel (UK)
Reporting to: UK chief executive Guy Munnoch and European general counsel Rochus Gassmann
Turnover: £2bn gross written premiums (GWPs) for year ending 31 December 2007 (Zurich reports in GWPs to give an indication of how many policies it has under management)
Number of employees: 8,694 (UK)
Annual legal spend: Estimated £5m (excluding claims)
UK legal capability: 29
Main law firms (UK): Beachcrofts, Bevan Brittan, Pinsent Masons
Main law firms (global): CMS Cameron McKenna, DLA Piper, Herbert Smith, Freshfields Bruckhaus Deringer
Neil Hodge’s CV
Education:1976-82: Sevenoaks School, London
1982-85: Loughborough University
1987-88: CPE/Law Society Finals, Chancery Lane College
Work history:1989-90: Trainee, Allen & Overy (A&0)
1990-2000: Associate, A&O
2000-01: Senior lawyer, Group General Counsel’s Office, Barclays
2002-07: Head of corporate and commercial, Barclays
October 2007-present: UK general counsel, Zurich