Moore Stephens says
that current trends in the UK insurance industry point towards further consolidation and convergence in the underwriting and broking sectors over the next twelve months.
In the latest issue of the Moore Stephens’ newsletter Insured Interest, Simon Gallagher, head of the firm’s Insurance Industry Group
, says, “Consolidation has been a feature of the insurance industry for some years now, but there may be still some way to go. There are still a lot of potential buyers with large war-chests, willing to pay over and above what market intelligence might suggest is a realistic price. An underwriting period free of catastrophic losses, and a similar, concurrent period of healthy profits for insurers, has also increased the amount of capital in the market.
“It is no longer only brokers who are looking to buy other brokers. Insurers and financial institutions are now buying brokers, too, as part of an overall drive to secure the distribution chain, to increase competitive market share, and to secure bulk access to the market. Despite the tough compliance environment, the market continues to gravitate towards consolidation in both the broking and underwriting sectors.”
Gallagher notes that the mega-trend in the market across all disciplines is towards convergence. “Moreover,” he says, “there is geographical convergence, which produces such regulatory controls as Solvency II. All parts of the market, in all parts of the world, are talking to each other, and the common language that is emerging is one based around compliance, capital and controlling risk. In order to engage in the debate, firms will need to ensure that they are on the right wavelength.”
Gallagher also says there is greater pressure on insurers in today’s soft market to be more disciplined in the business they write and in the rates at which they subscribe. He adds, “The pressures exerted on commission levels will see brokers fighting it out for market share on the basis of superior service, niche specialisation and innovative reward structures as opposed to straightforward commission arrangements.”