Almost 45 years since he started at “the bottom of the pile” at Lloyd’s of London, with little more than an ink dip pen and some blotting paper, Stephen Catlin will next week begin the process of retiring from XL Catlin.

He will relinquish his position as executive deputy chairman of XL Catlin on May 15, and retire from the Bermudian-based company at the end of the year.

Before doing so, he has reflected on the state of the industry, its forward steps and the areas where improvements can still be made.

And he spoke of things Bermuda does better than the rest, and some it might consider polishing up to stay ahead of the pack.

Although he is retiring from XL Catlin, he is not about to disengage from the industry in which he has carved an impressive career spanning five decades.

He has written a book about the world of insurance from his perspective, including the history of Catlin. Risks and Reward is due to be released in the coming weeks.

And for the remainder of this year he will act as a special adviser to Mike McGavick, chief executive officer of XL Catlin.

Shortly after his retirement was announced, Mr Catlin spoke to The Royal Gazette about his career and the journey that saw the earliest incarnation of Catlin, with only about $30,000 of paid-up capital in 1984, evolve into a company with global revenue of $4.4 billion in 2014.

Two years ago, XL and Catlin became one, a formation that created a company with a market capitalisation of $11 billion.

It is all a far cry from the dip pen and blotting paper days of London in the early 1970s.

“We’ve had a fantastic journey. It’s been a great team effort,” he said.

There have been many changes during the intervening decades, most for the better but not all, according to Mr Catlin.

“The changes have been substantial and for the common good. Disclosure is much better, the professionalism is much better.”

He believes Catlin was the first at Lloyd’s to have a full-time lawyer and full-time actuary.

“Now it is a given that we have a team of actuaries and a team of lawyers. So we have worked our way through that,” he said.

“Modelling has improved hugely, so have learning practices, risk awareness, risk management, reserving, pricing, and risk transfer. They are all significantly better.

“It used to be seat of the pants. When I started we had an underwriting stamp. Lloyd’s provided blotting paper. I had a dip pen, and that was it. We borrowed a photo copier and we did not have a fax in the first two years.”

Spreadsheets were done by hand, requiring exacting skills and plenty of forethought.

“When I went to Lloyd’s in 1973 it was Noah’s Ark. I could not believe how bad the process was, and how inefficient it was.

“If you are doing a spreadsheet by hand, you don’t half think about it before you start. If you make an error at the get-go it is at least six hours just to redo the spreadsheet as a manual exercise, whereas nowadays you push the button and it comes out in 30 seconds.

“When you are having to do that manually it makes you think really hard about what you are doing.”

While technological changes have made things faster and more efficient, Mr Catlin cautions on overreliance on it.

Explaining how quantifying risk was done before computerised data crunching, he said: “We did it by commonsense, and there is nothing wrong with that.

“If I had a criticism of today it is that sometimes people are too inclined to believe the output of a model, or too inclined to find an actuary table without actually saying ‘Does this actually make sense?’

“I look at it and ask myself if I understand the risk, what is the frequency of the risk what’s the severity of the risk, and can my capital take that risk? A lot of that was done intuitively. Nowadays there are massive great processes involved.”

When it comes to future improvements for the industry, process is the key word for Mr Catlin.

“The thing that is giving our industry the biggest grief at the moment is the cost of doing business, which is driven by an archaic, inefficient process. We still have quadruple data entry in most parts of the business,” he said.

“I’m very pleased to have been involved in all the other changes I’ve talked about, but I’m incredibly frustrated by our inability as a marketplace to crack this process nut. We have to do it quickly, because if we don’t it will be done to us.”

Mr Catlin’s career started with Syndicate 264, at Lloyd’s, in 1973. He rose to the position of deputy underwriter after eight years.

In 1984, when he was 30, he jointly formed Catlin Underwriting Agencies. The agency started with £25,000 ($32,500) of paid-up capital.

The company grew, reinvesting its revenues and benefiting from a lack of legacy baggage. A holding company was domiciled in Bermuda in 1999. Catlin reacted swiftly to the changing market conditions after the 9/11 attacks and raised more than $500 million in capital in 2002. Two years later Catlin Group went public with an IPO.

In 2015, XL acquired Catlin in a $4.2 billion deal, with XL redomiciling to Bermuda the following year.

“The reason why we sold was because both Mike McGavick and I were of the view that there was going to be consolidation in the industry. And if you did not consolidate the question was would you stay relevant,” Mr Catlin said.

“Now, two years on, we can’t have two people running a business. Mike was CEO, I agreed to it. I took the view that I would hang around for a couple of years to help steady the ship through that integration process, which was complicated because they had 5,000 people, we had 2,500.

“There was a lot of work to be done. I think most people would say that job has been done pretty well.”

Regarding Bermuda’s position as a leading global hub for the insurance industry, Mr Catlin said the relationship between the industry, the Government and regulator — the Bermuda Monetary Authority — was critical to its past and future success.

“To have that relationship — there is no other place in the world that has that collective view of life. The attitude elsewhere is not the same.”

However, not everything is rosy in Bermuda’s garden. There are areas where improvements can be made.

“We’d like to see further stability, and we’d all like to see the fiscal hole filled,” he said, referring to the island’s $2.4 billion debt.

“The cost of employment is too high in Bermuda on a relative basis around the world, especially when you talk about shared services.

“There’s an employment competitiveness that needs to be looked at and a mind change, and particularly with kids coming through education to give them the aspirations of what they can achieve, better than we are doing at the moment.”

After his retirement at the end of December, Mr Catlin will continue to be associated with XL Catlin. For the first nine months of 2018 he will be a consultant to XL.

Beyond this, he will continue his leading role with the Insurance Development Forum, a partnership between the industry, the United Nations and the World Bank that aims to close the protection gap, the gulf between economic losses and insured losses, particularly in emerging markets and poorer regions of the world, and building a sustainable insurance market that can be accessed by a far greater portion of the global population.

“I’ve believed for a very long time that we as an industry have not communicated very well the value proposition of insurance outside of homeowners and auto.

“People do not really understand how we can enable. Insurance is an enabler for other people to take on more risk and grow their businesses.

“If there wasn’t insurance in the world, the world would stop working. The world needs insurance now far more than it needs banking. There are alternatives to banking now, there are no alternatives to risk transfer.”

Mr Catlin and Joaquim Levy, managing director of the World Bank Group, gave a presentation on the IDF’s work to insurance leaders at the Risk and Insurance Management Society’s conference in Philadelphia last month.

“We are in unchartered territory, but there is a shared vision that insurance as a product has proven societal value and can help economic development,” said Mr Catlin.

“There is very clear evidence to show that if you have a significant loss, if there is more insurance bought, then the economic recovery is quicker, the human depravation is less and the cost to the taxpayer is lower.”

That societal aspect is as important to Mr Catlin today as it was at the start of his career.

When asked if he had any regrets about choosing insurance as a career, he said no. But he added: “For the first five years I was not sure. I was not sure if we were running a great gambling casino or if we were adding a social value, and I nearly left the industry because of that.

“No one explained to me the social value of insurance. Once I got my mind through that bit, from an attitudinal point of view I have never looked back. It’s a great industry. There are great people in it nowadays, and much higher standards than there used to be.”

Mr Catlin’s book Risks and Reward will explain how insurance works and include a history of Catlin Group and the challenges of growing a company from scratch. It will also look at how to deal with counterparties, agencies, investors, regulators, capital raising and the “push/pull” of mergers and acquisitions.

“There’s a large part that is personal observations as to what the challenges are for the industry going forward,” he said.