these markets. That is a real positive for us but we need to also select business carefully and pick the right places to trade,” Andersen says. “Are we comfortable picking up property business locally in many locations or should we concentrate our expertise in our hubs? How do we ensure we have the right broking expertise where it is needed?”
This dynamic means he must make some tough but smart decisions around the allocation of resources.
have big hubs in London or Singapore but what happens if clients want to trade where they are based, as opposed to from a regional hub like that? Part of the how we deal with that.”
He also believes this dynamic will drive some repositioning among brokers. He notes that the recent deal in which Willis formed a London wholesale of one of the bigger players attempting to reach new business through new distribution channels.
NAVIGATING SHIFTING SANDS
There are other—arguably, more fundamental—ways in which the broker market is shifting. Andersen said in a speech in London in March 2015 that the traditional broker chain in which business is placed from corporate to insurer to reinsurer to the retrocessional market could collapse completely in the years to come.
the re/insurance industry—driven by an overabundance of capital and lack of losses combining to keep rates at rock bottom—and the growing diversity in the sources of capital entering the industry and the way it is willing to take on risk.
ago, the lines were pretty distinct in terms of who did what and the types of risks they took on. That is changing rapidly, especially in light of some of the recent deals we have seen,” says Andersen.
more examples of large companies merging so they take on both reinsurance the end product and the tools needed to work in both insurance and reinsurance both sides of the business.”
He notes that when you add to this dynamic the growing remit of some picture becomes increasingly complex and challenging for a traditional broker to navigate.
“One way of saying it is simply that capital is not staying in its own swim lane
buyer; people are always open to the opportunity to trade further down the chain. That poses both a challenge and an opportunity for the broker.”
He maintains that the business models of reinsurers and insurers are very
Their expertise and relationships have all been built over many years with this
From this perspective, Andersen does not foresee any great merging of these
customers’ needs and the same logic applies to insurers and reinsurers,” he merging of the disciplines—clients want to keep them separate.”
Yet, in contrast, he says, most capital providers are neutral on where and how their money is put to work as long as the returns compare favourably with the
risks and being nimble enough to get it in the right places at the right time,” Andersen says.
“The reality is there are growth opportunities out there on both the insurance
broker’s role to connect the two.”
capital looking to get ever closer to the source of the risk, be it by working with an insurance company or even, ultimately, a corporate customer. He sees no issue with this; rather, it represents an opportunity for innovation.
“One of the good things about being an intermediary is that you can try and
solve problems with the capital that is available. There is a more traditional route and that has huge embedded advantages for clients. But, where appropriate, we have the opportunity to solve some of the challenges of the day and create new relationships.
“We are pushing our clients to be more innovative and open to using new risk taking structures, partly because this is what will help maintain these historic relationships.”
JOINING THE DOTS EXTERNALLY
Most of the bigger cedants now use a mixture of traditional reinsurance,
varied and increasingly sophisticated risk transfer programme. For the global transfer solution without ending up in the position where its teams internally are
He admits that getting the balance right is a work in progress. Spring 2015 | INTELLIGENT INSURER | 9
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