Well-founded concerns about the compression of the insurance broking market receive a welcome negation each time a new broker or broking division is launched. The market recently welcomed a new player with the news that Paratus Holdings has established a new insurance broking division – Paratus & Partners.
Regulated by the Financial Conduct Authority (FCA), the business will look to provide specialised energy price risk broking expertise and enable UK clients to access Paratus’ Guernsey-based insurance platforms.
Discussing why the time was right for the launch, Gus Majed (pictured), founder and CEO of Paratus – which introduced the world’s first insurance solution aimed at mitigating energy price risks – highlighted that the industry has increasingly high expectations for specialist insurance products.
“We felt strongly that by launching a specialist broker, Paratus & Partners, we will provide the level of industry knowledge and expertise to manage the effective distribution of Paratus insurance products,” he said. “Insurance brokers and energy market brokers focus on insurance and energy markets respectively, but they do not collaborate.
“Operating in a highly specialised energy market, where the movement or transport of electrons and molecules is operationally extremely technical, requires expertise to understand and interpret the nuances and to facilitate an informed dialogue with clients.”
Equally, he added, in order to effectively distribute a licensed insurance product, brokers must be fully cognisant of the regulatory and permitted marketing framework to enable the secure broking of these energy products to their clients.
Highlighting where this division fits in with the broader Paratus strategy, Majed shared that Paratus & Partners will exclusively broke Paratus’ core product offerings – renewable power & biogas, all the transition fuels such as marine and jet fuel, as well as freight, LNG, and carbon emissions. As such, he said, the offering closely aligns with Paratus’ mission to protect clients against energy price risk and provide an “innovative, commercially viable” solution to accelerate the transition to renewable energy and sustainable fuels globally.
Looking to the broader spectre of what’s happening in the energy risk market today, he looked to how the current escalation of Middle East conflict underscores the ever growing need for all energy price consumers (and producers) to address their underlying risk to the volatility of these markets. As long as there remains political friction in key commodity producing regions, he said, there will always remain a high risk of extreme energy price movements.
“In terms of the power and gas markets,” he said, “we have seen a confluence of an unusually warm winter and record high gas storage levels resulting in the sharp decline in power and gas prices. At the same time, the recent spike in the input variable costs going into the manufacturing of these renewable power assets (wind turbines, metals, and also ancillary services), has led to a significant decline in industry profitability.
“As such, we are seeing bottlenecks in the development of projects, for economic purposes. We believe this will lead to either a supply power crunch, and in turn, higher power prices, and/or a forced reduction in CapEx [capital expenditure] costs.”
Majed noted that with these market conditions in mind, assembling the right team of experts to lead this new broking division has been integral to its launch.
The right team with the relevant expertise is absolutely essential and mandatory, he said, as the only way to effectively distribute very specialist insurance products is through combining in-depth energy market knowledge with insurance market specialism. Picking the right team members, who have the same spirit of partnership and drive, is also fundamental to any business’s collective success.
As to what clients are looking for from their broker partners today, and examining whether the emphasis on having trusted advisors has changed, he commented that: “Knowledge is power, and full alignment is key.”
“Once clients understand that their broker works on their behalf and is solely focused on providing them with the very best bespoke solution, the dialogue is more open and iterative to formulate and arrive at the best possible outcome,” he said. “Our clients really appreciate and respect Paratus & Partners' deep energy markets specialism, and the ability to share market and industry feedback is proving to be highly valued.”
It's a busy time for Paratus – and Paratus & Partners – and Majed noted that the year ahead for the business is all about continuing to execute on its growth strategy and scaling effectively.
“Our aim is to provide innovative and commercially viable insurance products that accelerate the transition to net zero,” he said. “As Paratus offers the world’s first energy price risk insurance, we are committed to educating clients on how our policies mitigate adverse energy price movements, thereby protecting revenue, and enhancing cashflow and IRR.”
