Europe speaks

PB: We have had a soft market in the UK recently. What state are your respective home markets in?

Bouscarle: The French market is just as soft as all the other European markets. We should also bear in mind there is a large representation of international carriers. There's plenty of capacity for anyone to come up with any sort of premium.

Schaft: The Dutch market is showing signs of softening, particularly in property and casualty. In the Netherlands we will be reaching the end of the soft market at the end of 2008. Last year was softer but now we have flat or minus 10% but mainly on property.

Vanoorbeek: In Belgium it's the same.

Finch: There are signs in the UK that there will be hardening. Some liability classes are looking firmer in particular.

Franzi: In Italy everyone is trying to protect their revenues. On the market side it is still very soft, but in energy especially it's hard to find capacity.

Nepala: In the Czech Republic the market is still softening with companies undercutting each other. The insurers are more aggressive here than in other countries and there is a low claims ratio. Property is stabilising but is still soft.

Madsen: We are getting two new carriers in the market and that's good because it means we can put more quotes together for clients. Also, workers' compensation premiums are going up by at least 10% each year. It's a state thing; each year they make an amendment to the law and brokers can't control it.

Riehl: Property is soft, but some liability lines haven't been. Players from Spain and Japan and so on, as well as firms such as QBE and AIG are all focusing on the general market. These are also waiting for the hardening.

Thurnherr: Axa, Zurich and Allianz are the main three insurers in Switzerland. Premiums have gone down 20% this year; we have a soft market.

PB: How strong are independent brokers in your market? Are there consolidators?

Schaft: In the Netherlands we have 10,000 agents and brokers. The expectation is that 50% will disappear in the next three to five years. About 90% of those 5,000 brokers are companies of just five to ten people and they can't keep up with regulation, so at the moment there are thousands of companies selling up. In the top 50 you have brokers buying brokers. We have Aon and Marsh, then a group of about 50 (consolidator) brokers; we are one of them. Some are buying brokers to create more volume. We are talking to three companies to do this. It's either up or out; the top 50 have to enlarge or they are not well placed for the future.

Madsen: We bought two companies in Denmark and they said that our international contact was the most important thing to them.

Nepala: The six biggest brokers have 40% of the broker market. Now we see small brokers approaching bigger brokers about co-operating or selling. The problem is that every agency is different and there are different expectations and productivity levels.

Franzi: We have a strange situation in Italy where there are 790 brokers trying to understand how to survive in the future. We have the problem of insurance agents losing their advantage and looking for new opportunities. For big brokers the only way to grow is by acquisition; sometimes they buy the same business three times!

PB: Do you have insurers going direct to your clients?

Franzi: They are trying to cut costs. Now also reinsurers are going direct to clients. Everyone is trying to offer a different way and everyone is working on a cost basis. It should be on a consultancy basis. We aren't worried about aggregators; that's just personal lines in Italy. We actually use aggregators on behalf of our clients.

Thurnherr: The change of generation is important. Lots of brokers are 50 to 60 years old and they have no clear plan.

Bouscarle: There are several thousand brokers in France. The independent broker market is consolidating mainly because of the generational issue; they were often large family concerns. It's mainly been Marsh, Willis and Aon, but also others. We have bought three businesses. There is not much new business out there, so internal growth and acquisition are the options. Compliance will also be a problem.

PB: Is retention high in your businesses?

Bouscarle: At Verlingue it's 97% or 98%. I think it's a matter of culture in France. People don't like to talk to machines; if they like the person they will continue. It's very much a face-to-face business and that makes if more difficult to win new business.

Vanoorbeek: Brokers are pushing carriers to go for three-year contracts. It's strange, but that's business in Belgium.

Bouscarle: We are telling clients to make the most of the current terms. Everyone thinks there will be an increase in overall rates in 2008.

Franzi: (In Italy) it's now forbidden to have long-term agreements.

Vanoorbeek: We once had five to ten year contracts, but after the events of 11 September 2001 we were given one-year contracts only. Carriers are defending their portfolios. We are doing a lot of work today just to keep our portfolio.

PB: How has being a member of the Worldwide Broker Network helped your own business?

Franzi: From my point of view, being part of an independent broker network is very important for us to grow and we have taken a lot of clients from larger brokers.

Finch: We started WBN in 1989 in anticipation of a single European market. It began as nine independent, mid-sized brokers that aimed to serve clients in the new market in 1992, at a time when global trade was expanding rapidly.

Vanoorbeek: It is important, when you see that there is nothing new in Belgium, that there is only 3% growth, yet in our international portfolio we have at least 17% growth. We were losing clients because they were moving production to Eastern Europe and then Asia. Before we knew it we had clients with business in 16 countries and clients of the 'big three' were not so happy with their service.

PB: How is regulation working in your respective markets?

Schaft: In the Netherlands it came into force on 1 January 2007. We had something before but it was an in-between option. The UK couldn't work with us. We have 10,000 people with licenses and 1,000 having a fight with regulation. All of those companies are selling life policies and they are in trouble, but those in commercial lines don't have any problems.

Riehl: We have had regulation since May 2007. It's about consumer protection. What I find irritating is that retail or car dealers can still sell insurance and it drives me crazy. There's a big burden of bureaucracy and administration on our shoulders. It's disturbing and we are suffering to a certain extent.

Franzi: In Italy we were supposed to implement it in 2007, but it's not completely clear. In Italy they don't read policies. There are problems in changing to have a separate bank account for clients and your own money. You have to have a certain number of hours of training, then go on a register.

Bouscarle: In France it should have been effective on 1 April 2007. We don't read about it in the professional press. When I approached our legal department they said it was about protection and PI policies. It's compliance from a defensive perspective. It's totally negative and the French are already good at being administrators. It's an endless tirade of paperwork.

PB: Do you disclose commission?

Bouscarle: No, in France you don't discuss it although it's very important. A few hundred of our accounts have business on a fee basis. However, now some of our mid-market clients gradually are asking us to be more transparent and we will have to envisage a new approach as to how we charge for services.

Madsen: We have been heavily regulated since 2003 and it will soon be forbidden to receive commission. At Danish companies that deal in property and casualty insurance, the new rules will be ready for 2011.

Thurnherr: We have had regulation since 2006. It brought bigger liabilities to brokers. Now we are more careful in dealing with clients and it makes the job more demanding.

Riehl: For life insurance they have to show the full cost of the policy in Euros. This will lead to another discussion on hidden costs.

Schaft: It's about a level playing field. The banks and direct writers don't have to disclose. I don't know when it will happen but it's only a matter of time before we have transparency.

Vanoorbeek: With a portfolio of international clients we have 80 on a fee basis. The next step is 'what will be the size of your fee?' People will ask about (the remuneration for) claims and service providers as well.

Finch: We keep a time record and hourly rate for each account handler in the same way a lawyer or accountant would. If they think it's too high we ask them whether or not there are aspects of our service thatthey want to reconsider.

THE GUESTS

Stefan Thurnherr, Director, VZ, Switzerland

John Bouscarle, International director, Verlingue, France

Paval Nepala, Chief executive, Renomia, Czech Republic

Michel Schaft, Chief executive, Meijers, Netherlands

Reinhard Riehl, International director, Suedvers, Germany

Bart Vanoorbeek, Co-ordinator for international department, ADD, Belgium

Luca Franzi, General manager, Raisini Vigano, Italy

Eva Madsen, Key account manager, Dahlberg, Denmark.