by Steve Goate
As brokers get set to head to Manchester for the annual conference of the British Insurance Brokers’ Association (BIBA) Steve Goate (pictured), director of intermediary services at Davies Insurance Services say UK retail brokers have the opportunity to access Lloyd’s directly to make the most of the market’s capacity.
The world’s oldest insurance market is set to publish its blueprint for its future next month and brokers are set to be at the centre of those plans.
New Lloyd’s CEO John Neal has said the market has created its prospectus for a “braver new world” which will provide the options for the new shape of the 300-year old insurance institution.
Already there is talk of a new system which will allow syndicates to bring new products and business into the market quicker and more efficiently. It has also raised questions around providing greater access to the market. While it has said nothing is off the table, it has not specifically said it will change the structure on any move away from being a broker-led market and going direct to the client.
Therefore, many in the market believe that the result of the prospectus and the four-month consultation period will be a move to encourage more UK retail brokers to look to Lloyd’s for capacity and products.
Traditionally retail brokers will use wholesale brokers to access such capacity and there is and will remain a role from the wholesale broking sector. However, increasingly there is a move by brokers to look at how they can go directly to the market.
The benefits are obvious. In an environment where price remains a significant driver to the client, going direct to Lloyd’s capacity will eradicate the need to pay wholesale broking commissions and will either see the retail broker take a bigger share of the premiums or pass that reduction on to the end client.
Of equal importance is the fact that with such a direct approach the retail broker keeps full control of the risk on behalf of the client and can ensure the cover is tailored to their client’s needs.
We have yet to see if the new Lloyd’s prospectus will look to change the requirement in terms of what is needed for brokers to access the underwriting capacity.
At Davies Intermediary Services we can and do provide the ability for retail brokers to access the market and the regulatory support to gain the permissions to effectively become a Lloyd’s broker.
That support is significant in the ability for retail brokers to deal directly with syndicates and the ability to deliver the necessary support has seen an uptick in interest and I expect that many of the meetings I will be having in Manchester will revolve around the questions around how best to access Lloyd’s.
But the recent M&A activity we have seen in the broking sector coupled with every indication that the pace of M&A will not diminish has created a further dynamic for Davies and our clients.
As we saw in the late 1990s when there was a significant round of broker acquisition, the new larger organisations will examine their future structure and with it their participation in certain classes.
With the best intentions in the world any M&A deal will see a degree of overlap and the result on many occasions is teams of brokers, often with books of business, that their parent company no longer have an appetite for, are left seeking a new home.
Some teams may well look at potential to access capacity themselves and create an MGA, but for many brokers their path of choice would be to create their own brokerage business built on the contacts and the business they have built in the past.
Increasingly we are also working with brokers to incubate new intermediaries in a process which can be quickly and efficiently delivered on an authorised representative basis.
However, be it accessing the Lloyd’s market or the creation of new broking operations the need to navigate the regulatory landscape and providing cost efficient back office service in a way in which allows the broker to concentrate on delivering the best products for their clients remains a topic for continued discussion.
