During the last two decades, the coastal surfing town of Maroochydore has become one of the Sunshine Coast’s commercial hubs. This month, Thompson Insurance, a local brokerage that facilitated some of the Maroochydore building boom, was acquired by global insurance firm Gallagher.
In a media release announcing the acquisition – the firm’s second on the Sunshine Coast in about six months – Gallagher referred to the area’s $21.5 billion economy that looks to grow to $33 billion by 2033.
“Gallagher is determined to play our part in this by supporting businesses to face their future with confidence through the provision of bespoke quality risk and insurance solutions,” said Sarah Lyons, Gallagher Australia’s CEO.
According to the release, the acquisition of Thompson Insurance, a five-person firm with a specialisation in construction and commercial property insurance, will bring the global brokerage valuable local knowledge.
“We’ve always leveraged our local relationships through surf clubs, footy clubs and a lot of involvement with local business networks, Chambers, the council and the like,” said Will Thompson (pictured above), a director of the local brokerage and son of Peter Thompson who started the firm 18 years ago. His father stepped down as a director two years ago.
“If you partner that with Gallagher’s global reach and expertise, let’s hope it will be a match made in heaven!” said Thompson.
However, he’s also realistic about the current challenges across the insurance sector.
“Things are getting very difficult, costs are going up and weather events aren’t easing,” said Thompson. “Hopefully partnering with a company like Gallagher will give us a bit more pull to get better results for our clients.”
The family’s decision to sell the firm, he said, was partly driven by these current challenges in the construction insurance market.
“In [construction] insurance, it’s just such a limited market nowadays,” said Will Thompson. “There are very few people who can write construction insurance.”
He said many of the main insurers, particularly those who work with smaller businesses, “are completely out of the market.”
“Then at the bigger end of town, you need the introductions from companies like Gallagher to even get a nod from them [insurers].”
Thompson said high claims costs are driving some of these issues.
“Long tail liability claims are causing all sorts of headaches for insurers - things that happened five or six years ago costing well into the hundreds of thousands [of dollars],” he said.
Many of these claims, he agreed, are to do with worker injuries or building defects.
“Worker injures and building defects – that’s exactly right,” said Thompson. “All you have to do is open the Brisbane paper or the Sydney Morning Herald and you hear of another building that hasn’t been built, either for compliance reasons or standards issues.”
He said these problems could involve, for example, the insurer, contractors or certifiers.
“Everyone just gets dragged into it and it ends up being a costly battle,” said Thompson.
Apart from insurance challenges, he said, the building industry itself has a range of difficult issues.
“Wages are going through the absolute roof,” said Thompson. “People are offering five and 10 grand sign-on bonuses and paying for families to move up from Sydney and Victoria - and they still can’t attract and retain talent.”
This is significantly increasing the cost of building projects, which pushes up insurance costs and amplifies the trouble a brokerage can face finding covers for a construction client.
One piece of good news – the building materials supply chain has improved.
“The supply chain has eased a little bit,” said Thompson. “Obviously, it went bananas through COVID, where things were just extremely difficult to get, but you can get materials and resources now a little more easily, which is a good thing.”
However, the combination of these increasing insurance and building industry challenges were a big reason for the family selling to Gallagher.
“Initially Gallagher approached me, around March last year,” said Thompson. “That obviously led to a lot of thinking and discussions with the family, and with my partner, but we saw it as a great opportunity to evolve and take the business to the next level.”
He also said that the COVID-19 pandemic only accelerated the economic growth in the area providing opportunities for bigger businesses. Thompson suggested that partnering with Gallagher is a way to take advantage of this growth.
“We see this as really the next opportunity, Gallagher brings global strength,” he said. “There’s no denying insurance is getting more and more difficult, so having one of the big players like that backing us to do our job and enable us to service our clients could be very beneficial.”
Thompson said he had “a lot of good conversations” with Gallagher executives, including Lyons. He also had discussions with other smaller firms about possible mergers, but the global brokerage seemed a better match.
Thompson is bargaining on the global broker’s insurer relationships and international experience.
“They were very passionate about what they were doing, and the company that they worked for, and it just seemed an easy fit,” said Thompson. “There are some very experienced brokers who I’ll get to work with and be supported by - they will be able to introduce us to and help our clients get better results.”
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