Praise God for Gallagher: answering the prayers of the Catholic Church gave Arthur J. Gallagher & Co, a national name

Risk & Insurance, Nov, 2006 by Erin Fogg

To understand why Arthur J. Gallagher & Co. has a Religious Practice Group, you have to go back to 1958. A fire at Our Lady of Angels Catholic School in Chicago consumed the brick and wood frame building, killing nearly 100 children and nuns.

"Literally, there were classrooms of kids dead at their desks," said President and CEO J. Patrick Gallagher Jr. "This parish had very, very little coverage."

After the fire, Gallagher's father and uncle, John and Bob Gallagher, respectively, were instrumental in helping the Archdiocese of Chicago create its own mutual insurance company that covered all of the parishes under one program. This model took off, and John Gallagher traveled the country, explaining to dioceses the concept of "protected self-insurance."

"Prior to 1962 or so, self-insurance and, specifically, risk management-type approaches to insurance didn't exist in too many companies," Gallagher said. "Particularly, in dioceses and religious institutions, they simply bought insurance, mostly at the local level, and that's just how it went."

The Gallaghers' unique approach to insurance fit the Catholic Church's needs. They began writing up dioceses nationwide, which soon grabbed the attention of public entities. Growth spread across all sectors of the company throughout the 1970s, allowing Arthur J. Gallagher & Co. to go public in 1984, with about $60 million in revenue.

"That's what put us in a position to grow where we are today, which is the third largest broker in the United States and the fourth largest in the world," Gallagher said. "If you track it all the way back, at the very cornerstone of our business is our relationship with dioceses and religious and not-for-profit organizations."

The fire at Our Lady of Angels was an extreme situation, a catalyst for the religious and nonprofit communities to rethink their insurance coverage. But the brokerage firm understood there was much more to coverage than the hazard of fire.

Gallagher cited a local example: The Catholic Charities of the Archdiocese of Chicago has hundreds of millions of dollars in budgeted services provided a year--for everyone from abused women, AIDS patients, foster children to the homeless. It houses people, feeds people, hosts events, rents out venues, counsels drug addicts, and operates schools where teachers are hired and children are transported. These are risks for the organization's employees and volunteers, as well as for the community.

"When you look at the risks there, it is as broad an area of exposure as you can possibly imagine," Gallagher said. "There's tremendous amounts of risk."

By their nature, charities deal with volatile situations. Their budgets do not allow them to offer wages that are competitive on a business level. Gallagher says religious institutions must look for employees who have big hearts and little concern for how much money is put in their pockets, "which in and of itself can be a problem," he said.

On the allegations of sexual abuse that have plagued the Catholic Church in recent years, Gallagher says bad people infiltrate every good organization from time to time, and the church has probably received more publicity than others with the same problem.

"The sexual misconduct problem has been a very costly problem for the church and, yes, we try to do everything we can to help them with both coverage and counseling and advice on how to deal with these situations," Gallagher said.

Because of the broad-based nature of risks in religious institutions, Gallagher's Religious Practice Group depends on a staff that is creative in its approach to the community's risk management needs, he said.

"They want somebody that truly understands their business, their mission, and recognizes that they don't have budgets that allow them to easily accomplish their mission," Gallagher said. "They want someone who focuses on, specializes in and understands their business on a level beyond any normal broker that's selling insurance."

While Arthur J. Gallagher & Co. certainly seeks out professionals who have established themselves in the religious-services sector, the broker also keeps an eye out for individuals within the organization who could be trained to serve these multidimensional clients in the Religious Practice Group. Gallagher added, however, that brokers often approach the company for employment because of their own deep-seated inclinations to serve this sector of the community.

"Ultimately, these are people that have to have a passion for it," he said. "You can provide insurance and risk management services and still feel good about yourself because in any walk of the world it's very valuable. But there are people who really get a good feeling--my dad was one of them-from the fact that they are helping people who are helping others."

BOB GALLAGHER

E. (Bob) Gallagher, chairman of the board of Arthur J. Gallagher & Co., died in August at the age of 83. Gallagher, the former CEO of the world's fourth largest brokerage, joined his father's insurance agency in 1947. He was named CEO in 1963, took the company public in 1984 and saw the company grow rapidly during his tenure.