Insurers edge closer and closer to brokers

Andrew Tjaardstra, Editor

We are starting to see the first signs of how insurers are reacting to Axa's aggressive push into the commercial broking sector. Axa group chairman and chief executive Henri de Castries has raised the temperature with his comment: "The UK market was surprised by our decision to acquire brokers, and other insurers will be panicking at the missed opportunity."

However, Axa is not the only insurers to have bought brokers. Allianz acquired Home and Legacy and Premierline last year, and Groupama bought Carole Nash. MMA has long owned Swinton, and both Equity and Highway have their own broking arms. Furthermore, Zurich has bought Endsleigh outright.

The difference is that Axa has bought significant players in the commercial arena, and at a time when the market is going through consolidation overdrive.

Groupama is the latest insurer to buy into commercial broking and the market will now watch Macclesfield-based Bollington's growth with interest, and whether the broker has plans to consolidate in a hurry.

Meanwhile, Allianz has embarked on a strategy of buying small stakes in listed brokers. It has bought 5% of the Jelf Group and now 5.6% of the CBG Group. This strategy can work well to release value for some shareholders and further the ties between insurer and broker.

The latest broker to partner with insurers financially is Cobra, which has allowed it to hold onto many shares it previously planned to list. Clearly many insurers are pleased the market is contracting and are happy to deal with fewer brokers.

Presumably, the higher commissions they pay larger brokers are countered by dealing with fewer broker visits, fewer systems and the opportunity of larger chunks of premium.

Despite the charge by insurers, the independent consolidators are not being left behind. Chris Giles is in the process of raising £100m allowing him to compete with the likes of Towergate, Oval and Axa. Clearly targets are identified before raising such huge amounts, and the financiers are impressed by what large quantities of gross written premium can bring to the table. Indeed, Macquarie Bank has just started to offer funds for acquisitions.

As insurers' strategies in this sector further unfold, one thing is certain - there is no stopping consolidation and insurers want to stay as close to the race as possible.