Having seen its UK arm through the financial crisis of 2008, Chartis European general counsel Chris Newby has shown his mettle. Katy Dowell reports
When Chris Newby left Norton Rose for AIG, as Chartis was then known, back in 2006, he could not have envisaged the way he would come to influence the international insurer’s legal department. In his first year he was working on AIG’s sponsorship deal with Manchester United FC; now he is taking control of its legal spend and looking to reshape how it works with external advisers.
Newby was made general counsel of AIG’s UK business at the beginning of 2008, several months before the financial difficulties facing its US parent emerged. It was in October of that year, as the realities of the Lehman Brothers collapse started
to hit, that AIG’s exposure to the US subprime mortgage market materialised.
In the US the company forced the biggest federal bailout in US history, taking $182bn (£113bn) from the government to prevent it from meltdown. In the UK, meanwhile, steps were being taken to ringfence the losses and Newby was called upon to steer the UK management through a regulatory maze.
It was a baptism of fire for the young general counsel.
“It’s a funny thing – sometimes you learn more from the bad times,” Newby reflects. “Of course, you don’t want to put your skills to the test in times of crisis, but when you have to you learn more about your skills.”
Newby found himself having to advise senior management on some tough decisions. It meant he was able to get close to the company’s executive as it looked to break free of the AIG brand and restructure for a more secure financial future. All this came as Newby overhauled the legal department and introduced a new structure so that lawyers could get closer to the management they were advising.
In July 2009, AIG started spinning off its property and casualty arm to form Chartis, which was led by Lex Baugh in the UK.
Newby is close to Baugh and when in July 2010 the latter was named chief executive of Chartis’s European Economic Area (EEA) and Switzerland business Newby became general counsel for Europe. The company moved its headquarters to London from Paris and is in the middle of merging its UK and EU operations – a deal Freshfields Bruckhaus Deringer is advising on.
A primary driver for the change, says Newby, was to allow the company to deal with European rule changes on solvency levels in the insurance market.
“Solvency II is a big issue for us,” Newby says.
The European legislation was first mooted in 2006 and, while a framework is in place, its implementation has been delayed until 2014.
“It’s a reflection of how difficult it has been to regulate,” Newby says. “It’s about fundamentally changing the business model of many insurers.”
The changing nature of the insurance markets means that in-house legal departments are best structured to work in partnership with the business. When Newby arrived at AIG it was home to five lawyers in the UK. That team has since grown to 11 in London, with 40 lawyers dotted around Europe.
The lawyers are expected to work hand-in-hand with the general managers in their own regions.
“If we have a lawyer sitting in that country they’re plugged into that market – they know the legal issues,” Newby says. “Getting second-hand legal advice to the chief executive or chief operating officer is never robust enough. You need to have all lawyers in the room. It stops people wasting time.”
The in-house legal team may be lean, but Chartis’ buying power means it is never short of seconded lawyers. Newby says it has taken lawyers on a temporary basis from CMS Cameron McKenna, DAC Beachcroft, Freshfields, Norton Rose, Sidley Austin and many others.
Last year Newby put together a legal panel for the UK business; next year he intends to build a panel for the European business, and create a legal roster for its UK headquarters.
The aim is to reduce legal spend. There are currently around 90 firms that can claim to be Chartis advisers in Europe, but that number is expected to drop dramatically and economic efficiency is high on the shopping list.
“I want to be able to say to firms ‘if we give you x millions in work you’ll give us a discount’,” Newby says. “We have a large legal spend on claims and we want to align it with the corporate panel, with all the synergies that go with that. We have a huge spend on claims and we want to reduce that.”
It is a demand that has not gone unnoticed by the legal insurance market. Clyde & Co’s merger with Barlow Lyde & Gilbert last week (2 November) gave it an instant volume arm, which is already serving Chartis in the UK, while the newly merged DAC Beachcroft is looking for ways to expand its commoditised business services.
Newby has been empowered to create an amenable practice stocked with lawyers who are in tune with Chartis’ business. His philosophy is to give the same encouragement to the lawyers who work with him so they can contribute more than just legal advice to the business.
Name: Chris Newby
Position: European general counsel
Reporting to: President of Chartis Europe Lex Baugh
Turnover: £2.25bn gross written premium for 2010
Number of employees:116,000
European legal capability:40
Main law firms:Clyde & Co, CMS Cameron McKenna, DAC Beachcroft, Freshfields Bruckhaus Deringer, Norton Rose