Keep a close eye on broker remuneration and alternative capital-Ken MacDonald, Miller

What is the role of the broker in today's market? Where do brokers need to improve? In terms of improvement, we need to strive for ever greater professionalism in the industry, through training and education, but also our practices need to be more efficient. Some of the remuneration arrangements that brokers have with carriers have changed, or are changing. For example, IT solution fees, pay to play arrangements and packaging books of business to enhance commission levels. Are such practices in the best interest of clients? We don't think so. Many buyers we speak with are quite cynical about these arrangements and to them it is not clear what happens behind the scenes. Miller is, and has always been, clear that we only want to be paid by the client, are advocates of the client and are independent when it comes to market selection and recommendation. So do you think that some of the much criticised broker remuneration practices, such as contingent commissions, are back in operation? I think they are back on the table-everyone in the industry can see that. The view from the outside is that there is not much difference between what some brokers were doing before and now. How they actually approach them is different, but it seems the market is slipping back to how things were before. I think many corporate buyers are concerned by this.hideWhat can buyers expect at their next renewals? Are there any signs of the market finally hardening? In general it is a good time to be a buyer. We had a difficult 2011 when there was some talk about the market turning but that has disappeared now. The underwriting results so far this year have been very good. In our conversations with some insurers we are seeing property loss ratios of 60% through to September. With a so far benign CAT season, and capital flooding into the reinsurance market there is clearly no real pressure for a market turn. The alternative capital will be filtering through to the front of the market over time-that's our prediction. We have already witnessed some remarkable reductions in renewals on the energy side of the business for example. Why should buyers choose Miller over the bigger brokers? What is your value proposition and how does it differ from the biggest players? In 2010 Miller made major investments in the corporate arm of its business. Since then we have been reinforcing the message that we offer major clients an alternative to the big brokers. We are still relatively unknown among a lot of the buyers in Europe but our footprint is growing. We are really all about specialist expertise and we act as a boutique broker. Miller is independent-a private partnership with no shareholders-so we really exist for our clients. When talking to insurance buyers, the general theme coming back is a desire for choice and perhaps more strategic advice that is truly in their interests. Increasingly, broker services are becoming more commoditised. We are very focused on what we are good at. So when we go into an area of business we want to hire the best people and offer very bespoke and high quality service. Our approach is strategic and consultative, backed up by technical skill across our broking and advisory capabilities. What lines and territories do you specialise in and where are you targeting growth? Miller's focus is on three key areas of our business-corporate specialty, reinsurance and programme business. Major areas in our corporate specialty business are wide and varied, but include large and complex clients operating in energy, marine, mining, financial services, manufacturing, FMCG and retail. We are also actively growing our capability in areas of concern to our clients-cyber, environmental risk, political risk and risk consulting to name a few examples. Our corporate retail business is growing at over 30% in 2013. Within corporate retail, we service clients primarily across the UK and continental Europe but are focused on certain countries. In particular, territories where maybe the local market cannot address all the complex risk needs and buyers naturally gravitate towards London, either for expertise or as a hedge against the local market. One of the reasons for our growth is that we are not necessarily looking to be a broker on all lines of a client's business, but focused on areas where we can add real value. As such, we are really comfortable working with other brokers and actively seek out those clients that see value in this and are not necessarily after a one-stop solution for all their requirements. Are there any areas of the insurance market where you would like to see improvements? There is a real area of unexploited opportunity for risk managers around how they structure their global programmes. The global brokers have invested heavily in their networks so they understandably wish to sell this to clients. Insurers have likewise done the same. It cannot be right that in every country in which a client operates they need a broker and a global insurer. Insurers will privately admit to us that there is a lot of overlap, duplication and inefficiency in the system. As a result, for over eight months we have researched the capabilities of all the different carriers on multinational programmes. We believe this has positioned us as an expert and independent adviser in structuring such programmes as we understand the capabilities of all major carriers plus the legal and regulatory requirements in every country. So we can assess whether a client needs a global broker in a particular situation, or country, or not. We can let them know whether they could just use an insurers' network for 0%, 50% or 100% of the placement. Provision of such advice, either unbundled from the placement as a consultancy service, or as part of our placement offering, is an area of opportunity we have identified. From a strategic perspective, Miller's capability in offering such structuring advice on the design, implementation and coordination of global programmes is a form of leveler with our larger competitors.

Keep a close eye on broker remuneration and alternative capital-Ken MacDonald, Miller

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