Consolidation Creates Interesting Dynamics in London Market

What’s been the impact of broker consolidation in the London market?

That depends on where you look. In some cases, for the first 18 months or so after a consolidation play, it has resulted in broking houses, who, in effect, have multiple teams doing the same thing. A year and a half is a long time in short-tail lines in a fast moving market, especially when it crosses two renewal periods.

What does that mean in practical terms?

Underwriters’ relationships with the individuals who make up these teams often hold more weight than company relationships with broking houses, or with the people in their top echelons. So, we have to adapt to changing pools of teams, with trading dynamics that do not remain constant.

At the other end of the scale are the large players that have amalgamated multiple teams into one and adopted a cohesive strategy. When that happens, we tend to trade with the broking house, as opposed to the individuals within it. I expect everyone aims for the latter, but some achieve it more quickly than others, because the strategy of creating a single point of contact can be hard to realise. It is important for underwriters to adapt, especially when the balance is adjusting between relationships and wider corporate considerations.

What’s the end result?

In many cases, it is a positive for all. The amalgamations, mergers and purchases create larger broking houses, which leads to increased opportunities for portfolio plays. When we are able to support a partner broking firm across multiple areas, and enter a high-level relationship, it can create a large-scale relationship spread across multiple areas of risk. We may be stronger in some lines, but the relationships with the larger brokers can help us to build momentum and exposures in areas where we are seeking to expand. Similarly, the brokers are exposed to our diverse product ranges, so they can extend their offer. It becomes a real, two-way street and creates an opportunity for everyone to benefit.

So, is some of the personal touch removed?

It’s a dynamic I have observed. There are always exceptions but often, in smaller, traditional London brokerages, a piece of business will belong to an individual broker. They control it, sometimes for many years, even their entire career. M&A tends to shift business from individuals to entities. In some broking organisations, we see a focus to achieve that.

And the overall impact?

Ultimately it creates a more balanced playing field for underwriters, because there’s always an opportunity to come onto business for those that offer a better product or more attractive terms.