Brokers are well-placed to gain investment in an evolving landscape that is seeing P&C insurers become more and more commoditised, according to a leading private equity firm.
The power is shifting from carriers to intermediaries in today’s world, Daniel Zilberman, head of European business at Warburg Pincus, said at the Brokerslink annual conference in Marrakesh.
“What’s happened over the past 15 years is the capital markets have figured out the P&C business,” Zilberman said, adding that investors are “spending a lot of time looking at the brokerage sector.”
The P&C sector is becoming commoditised, according to the investment head: “Whether you buy from carrier A or B, unless you’re looking at a truly specialised line, it’s the same product,” he said.
“Where we think the value is added is in distribution. It’s the advisors, the risk managers, the person who looks a client in the eyes and says – you should go with this carrier and you should design your program this way.”
While carriers are struggling with commoditisation, they are making efforts to stay lean, Zilberman said.
“They are getting more efficient, and there’s a number of ways they are doing it,” he said. “[Carriers] are outsourcing more and more of their middle office and back office, using TPAs and claims adjustors.
“They’re also trying to drive efficiencies by outsourcing some of their underwriting – you’re seeing tremendous growth in the MGA space, in speciality lines where [carriers] don’t have scale they’re happy to give the pen to intelligent underwriters,” he explained.
Amid that change, intermediaries are becoming increasingly important.
“Now that the capital markets have figured out the P&C sector, capital is going to rush in, and we think that the distributors, the advisors, are going to capture more and more of the value,” Zilberman commented.
And brokers will need that investment to be able to compete going forward, he warned.
“Clients are becoming more and more demanding,” Zilberman said. “They want you to be global, they want you to provide risk management solutions, they want you to specialise, they want you to provide technology and
investment. In order to do all this, you need scale. It’s very hard for a small broker to invest in technology, it’s hard for a small broker to become global… scale helps you do that.”
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