Big brokers linked with return to wholesale market

The booming excess and surplus lines market is attracting significant interest, with the world’s largest brokers rumoured to be preparing to re-enter the wholesale broking market. Executives at several companies said brokers and insurers are looking to take advantage of continued price hikes in various P&C lines through new divisions, new hires and mergers and acquisitions. Other areas of expansion range from affinity business to marine and aviation, executives said at the Insurance Leadership Forum, which is sponsored by the US Council of Insurance Agents & Brokers and was held earlier this week in Colorado Springs. In meetings and discussions at the event, there was significant speculation about the rumoured desire of Marsh and Aon to re-enter the wholesale insurance market. Such a move would come nearly 20 years after they shed their wholesale operations amid concerns over conflict of interests raised by former New York Attorney General – and later Governor – Eliot Spitzer’s broad investigation into the insurance industry. According to a report by Fitch Ratings released Wednesday, excess and surplus lines insurance, which is traditionally accessed through wholesale brokers, accounted for about 9% of US P&C premium in 2022, compared with a historical average of about 5%. Speculation centered on Marsh building wholesale capabilities internally and Aon entering the wholesale market through acquiring a retail broker with wholesale operations. Neither Marsh nor Aon would comment. WTW, which also sold its wholesale operations during the Spitzer era, does not have plans to set up a wholesaler, said Michael Chang, head of corporate risk and broking, North America, at the firm. “We have never, ever, said we were going to set up a wholesale broker,” Chang said. “That being said, we reserve the right that, if things change, we will change with the times.” WTW does have plans to significantly grow its North American business in other ways, he said. During the meeting, WTW launched a managing general underwriter (MGU), Verita CSG, which is headed by former Sompo International executive Edward Chiang, who joined in May. The MGU, which is supported by Markel Group, will focus on real estate, hospitality and leisure, financial institutions, and professional services industries. The MGU is staffed separately and walled off from WTW's brokerage operations, a spokesman said. Among other initiatives, WTW is looking to significantly grow its affinity business – where brokers partner with organisations to sell insurance products, such as auto insurance through car dealerships. “It’s sticky business – high retentions, high revenue, high margins,” Chang said. In addition to launching the MGU, WTW plans to expand its managing general agent business. “The MGU we are building internally, but the MGA we’ll be buying,” Chang said. Among other brokers, CAC Specialty, which was founded in 2019, has seen significant organic growth but may look for additional growth through acquisitions, said Mike Rice, CEO of the brokerage. “We’ll probably have more conversations about that this year than we’ve ever had before,” he said. “We’ve got a lot of dry powder to do some things.” BRP Group, like several other previously acquisitive brokers, has scaled back its M&As but is looking to grow through other means, said Trevor Baldwin, the firm’s CEO. “We’re largely on the sidelines for M&A right now. The cost of capital has gone up significantly over the past year,” Baldwin said. “We’re taking the opportunity to be inwardly focused on operational execution.” BRP has launched four new ‘centers of excellence’ this year, focusing on private equity, D&O, cyber and international business. “Those products are deeply technical and need dedicated expertise,” Baldwin said. In addition, it has launched multiple new products through its MGA platform, including several flood insurance products. “And we’ve got work underway to build out cyber liability, general liability and some new excess solutions as well,” said Baldwin. Insurers are also expanding in various areas. Zurich Insurance, which has adjusted its book of commercial insurance over the past few years, will continue to look to grow its middle-market business, said Sierra Signorelli, CEO of commercial insurance. “We’ve been growing in the double digits in that area,” she said. The insurer has rebalanced its portfolio with about one-third liability, one-third property, 25% specialty and 5% other lines, including crop. Previously, it was much more heavily weighted toward liability lines, Signorelli said. Among areas of middle-market expansion, Zurich is growing its cybersecurity capabilities, she said. In August, Zurich bought SpearTip, a US-based cybersecurity company. “We have capabilities that are more bespoke for the large corporates, but we were really looking at how we also deliver in the middle-market space in a more efficient way. SpearTip was an acquisition to support middle-market customers,” Signorelli said. Everest Insurance intends to expand in several lines, said Mike Karmilowicz, president and CEO. Everest is looking to “lean in” on first-party lines, including property, marine and aviation, and build out its insurance business globally, Karmilowicz said. Everest hired marine and aviation teams in London last year. This article first appeared on our sister website Business Insurance. For further news from Business Insurance, please click here.

Big brokers linked with return to wholesale market

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