April 7, 2004 by Canadian Underwriter
Commercial and reinsurance brokers are facing an increasing demand for their services, in light of the growing complexity of risks, according to the latest Swiss Re sigma study.
The study looks at development of the broker market over the past 20 years, and tackles consolidation, profitability and long-term prospects for brokers.
Significantly, the role of the broker has changed into that of risk service provider, well beyond that of insurance salesperson. This includes the provision of risk management, claims administration, asset management, employee benefit, human resources consulting, actuarial consulting and risk securitization services.
“Corporations with large commercial and industrial risks are facing a rapidly shifting risk landscape brought about by changes in the economy, the legal environment and the emergence of new risk classes,” says Thomas Holzheu, senior economist at Swiss Re. “As a result of the current hard market, brokers are experiencing strong demand for insurance solutions and risk management services. This increase in demand also reflects the growth in offshore insurance markets such as Bermuda, which are almost entirely broker driven.”
The brokerage market has seen consolidation, with two firms Marsh and Aon accounting for more than half of all global revenues, but many small niche players still abound. Further consolidation is anticipated amongst regional and mid-size companies hoping to grow revenue and market offerings. Growth opportunities also lie in the emerging markets of China, Japan and India, where broker penetration is “virtually non-existent”.