Risk distribution survey 2011

CRE asked a group of insurance managers, insurers and 25 of Europe’s leading corporate risk brokers what they believe brokers need to focus upon to make themselves an even more invaluable part of the risk management and transfer chain in years to come. One of the key findings of the survey, that was sponsored by Lloyd’s of London and Aon, was that a global reach and capability is fundamental. All the insurance managers interviewed worked for big companies with existing cross-border exposures and naturally said that they need brokers that can help them deal with the ever more complex demands of their expanding businesses, especially in emerging markets. But the insurance managers, insurers and brokers themselves agreed that smaller companies are also now increasingly in need of advice on how to cope with cross-border risks and find competitive coverage for their growing international exposures as global trade continues to grow, despite the economic downturn in Europe and the US.hideThe insurers and insurance managers agreed that brokers can therefore really make themselves invaluable and perhaps take the first tentative steps towards the risk consulting role that so many crave through expert programme design and particularly construction of global programmes that actually work. All of the insurance managers surveyed said they use a global broker as their first port of call and usually two or even three. Some said that they would not use other niche or national brokers to help them with specific problems of territorial needs because they do not want the added hassle of dealing with more brokers. Others said, however, that they like to use independent and niche brokers to keep the big ones on their toes and because of the higher levels of dedication and often specialist skills they can offer. The door therefore remains open for smaller brokers to build international business usually through the networks such as Assurex, Brokerslink, EOS Risq, WBN and Unison. But the message was clear to the brokers that if they claim to be global they have to make sure that they can actually deliver, and this applies to the global brokers as well as the smaller ones. There clearly remains a doubt among insurance managers, insurers and the smaller brokers whether the global brokers have really cracked it yet and are able to truly offer a consistent and seamless offering despite their size. Likewise it appears that the networks of smaller brokers must work harder to convince the biggest risk managers that they can truly deliver a seamless global service and have the market clout and sophistication to deliver the goods for buyers. Above all, the brokers need to focus more on the demands of their customers rather than ‘feeding their own complex structures and cost bases’ as one leading risk manager typically told CRE. Some risk managers still believe that, despite the best efforts of head offices to impose a single global culture and structure upon what was a collection of merged national champions, work still has to be done to deliver the goods. These insurance managers say that if the big brokers fail to deliver what they want and need they will increasingly look to the niche local brokers, combined with leading national brokers in home and other territories, to help them find the right coverage on the right terms. Marguerite Soeteman-Reijnen, Group Managing Director of Aon GRIP Solutions, conceded that it remains a big challenge for all brokers to offer the kind of seamless service that the buyers want and need. But she said Aon is on the case. “All our broking capabilities, not only in our Broking Centres in London, Singapore and Bermuda but also our global retail network and specialty units have been aligned to ensure a seamless coordination and alignment to offer our clients the best possible results, providing realtime access to state-of-the-art risk advice, innovative programme designs, and a gateway to global re/insurance capital,” she said. The delivery of solutions to varying risk challenges and across borders is clearly not simple to organise and implement and, as risk managers increasingly attest, is perhaps the biggest challenge that faces all in the risk transfer chain. The findings of Aon’s 2011 Global Risk Management Survey support this position as responses from nearly 1,000 organisations placed regulatory/legislative changes as number two on the list of top 10 risks they face, following the economic slowdown’s number one slot. Ms Soeteman-Reijnen described this as a ‘work in progress’ on a daily basis that is tackled on a matrix basis at Aon. “We are mastering the matrix every day as people work in teams and continuously connect colleagues with the right skills for customers. My job is to enable and facilitate my colleagues to ensure their advice can be delivered locally for the customers and intellectually challenge them,” she said. “In Europe, Middle East and Africa there are different languages and cultures and corporate behaviours but there also are common denominators particularly across industries such as telecommunications and we can draw on our experience and knowledge and apply global knowledge and specialty products. Solving a Rubik’s Cube is difficult but possible. We can take these complex common denominators and create innovative solutions for our clients,” continued Ms Soeteman-Reijnen. Adam Garrard, Chief Executive Officer of Willis Continental Europe said that the whole reason that brokers such as Willis, Aon and Marsh went on the acquisition trail to become global was to serve the larger clients. “They were going global and we needed to service them on a global basis. We talked about a network but that offers no control and it is important that your service levels and expertise are consistent. We were mainly London-based with huge expertise in specialty business such as marine, energy and construction. This is quite difficult to replicate on a country basis. Our owned network gave us the ability to do this and this expertise could never have been delivered through an independent network,” he said, adding that fluidity and commitment are the key factors to make it work. Norbert Noehrbass, Managing Director of Detmold-based broker Ecclesia, said that there is no black or white answer about whether risk and insurance managers should use global brokers or networks of independent brokers to arrange their global programmes. But he certainly believes that networks can work well for customers. “In my opinion the most important thing is that brokers in charge of such programmes have the workforce and in-house expertise to control the global offices they use. The Ecclesia Group collaborates with companies like JLT, SIACI and GrECo via an exclusive trading agreement,” he explained. Mr Noehrbass said that brokers have two reasons to expand abroad. Firstly, to follow their clients or secondly to introduce special services and products. The Ecclesia Group operates on both levels, he said. It expanded its niche brokerages on a selected European map and expanded its multinational business via GrECo, JLT and SIACI. Florian Karle, Managing Director of German broker Südvers is a big fan of the network approach. “Our nightmare scenario is what happened to Jauch & Hübener in 1997. Overnight they lost their entire network to a competitor [when it was bought by Aon]. We don’t want this to happen to us, so we created our own network named WBN, which is internationally focused with a presence in more than 70 countries. Brokers have to decide for themselves whether to build up their own network, which is very costly and time-consuming, or use the network of another company. But being internationally active is very important for brokers, they cannot do business without it,” he said. Stefan Nill, member of executive board of Dortmund-based broker Leue & Nill believes that, as a medium-sized broker, to arrange global coverages effectively one needs to play a clever game to best represent the interest of the client. “You need to cooperate with global brokers, who are part of an international network, irrespective of whether they are large brokers or a smaller independent company which is part of a network. Insurance markets are becoming concentrated, legal situations change constantly. The broker’s job is to accompany the client through these processes,” he said. The growth markets for brokers are Latin America, India, Russia and South East Asia, according to Mr Nill. “The insurance industry is still growing there. Brokers will have a prosperous future there if they are able to position their services in a sensible way. In central Europe, however, the slices of the cake are becoming smaller and smaller,” he said.

Risk distribution survey 2011

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