“We are seeing significant growth as a result of the global
reinsurance brokers abandoning smaller reinsurance accounts.”
Aon Benfield, with broking revenues of $1,480 million in 2009, Guy
Carpenter ($911 million) and Willis Re ($635 million) stand streets ahead the next two, Cooper Gay and Towers Watson, which each received broker revenues of around $160 million. However, the reinsurance brokers that are expected to benefit the most are those outside of the top 10.
What is preventing the big brokers from going for smaller business? At
the top of the list of answers is the large brokers’ investment in emerging markets and the effort to find more efficient ways to deploy resources— some contracts simply fail to bring in the kind of revenue big brokers expect from their weighty resources.
The result is that mid-sized US brokers are increasingly gaining
reinsurance business as global players withdraw from smaller accounts. The top international reinsurance brokers are responding to pressure to
secure the big ticket contracts. Global reinsurance brokers are following the market opportunities in new
business lines and emerging markets. Steve McElhiney, president of Texas-based broker EWI Risk, said the
trend has had a significant positive effect on the middle market including the company he leads. “We are seeing significant growth as a result of the global reinsurance brokers abandoning smaller reinsurance accounts.”
The situation has led to opportunistic hiring by mid-sized brokers taking
expertise from the larger firms. EWI has also been able to expand its pool of clients, resulting in “40
percent year-on-year growth”, McElhiney said.
The trend is not only seen in niche areas, but across a number of business lines and geographies.
“This expansion has been across a number of lines from which the major broking players have withdrawn, including mutuals, captives and risk retention group accounts,” McElhiney confirmed. He said growth had been most noticeable in the US Southwest and West Coast regions.
Tom Culp, vice president for excess casualty at Torus, confirmed that smaller premium items are sometimes “left on the table”.
“We certainly feel that this area of the market is underserved as things become tighter and companies scale down,” Culp said.
Torus is targeting small and medium-sized US business with a new
web-based facility called Escape, for umbrella and high excess liability contracts. Their new portal is expected to make the servicing of smaller accounts more efficient for their own underwriting and for brokers who wish to use it. He added that finding the right broker pays dividends for an underwriter taking such a unique approach.
“Underwriters that find the right broker would potentially have access to significantly more business,” he added.
16 | INTELLIGENT INSURER | November 2010
Maiden Re chief executive officer Art Raschbaum said he was seeing positive signs and ‘opportunity flow’ from regional business in the US, his company’s specialism. Asked whether he thought mid-sized brokers were gaining ground, Raschbaum said: “I think that’s probably true, we do have a unit that is a surplus lines or excess underwriter of property risk and I think it’s fair to say that segment is very competitive today.”
Business lost by the global brokers would be harder for them to win back
since smaller brokers are in a position to “provide a more intensive service”, said McElhiney.
McElhiney added, “Our value proposition is to intensively service such accounts, and to provide a wide array of account services and consultative advice for a wide array of needs, which has been often lacking at the larger predecessor brokerage firms due to their higher cost structures, layers of management and related constraints.”
EWI has been able to take full advantage of its size to exploit these openings, he adds.
“As a smaller firm, we can be nimble in the marketplace and profitably maintain those accounts that the global firms are dismissing; in fact, we welcome them,” EWI’s McElhiney said.
However, not all smaller and more nimble brokers are able to reap
rewards. Brokers must be large enough to provide essential services, such as more sophisticated data analysis, capital modelling and regulatory compliance services, that are increasingly demanded from clients in the international insurance markets.
Brokers also need to be big enough to have a global reach and broad
base of international relationships in order to access the right underwriting specialisms at the right price.
Tad Montross, chief executive of Gen Re, said he believed brokers needed
scale. Speaking during the Monte Carlo Rendez-Vous, he said: “I would ask whether some of the small brokers have the ability to carry out catastrophe modelling, Solvency II and DFA [dynamic financial analysis], and others. To do all of those things has to be a huge challenge for them,” Montross said.
Brokers, he said, are redefining their business as risk advisors, adding that this is the “right way to go”.
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