As reinsurance companies increasingly develop capabilities that allow them to interact directly with customers, the position of brokers in the value chain has come into question.
Speaking during events at the Reinsurance Rendez-vous event in Monte Carlo, the heads of reinsurance at Aon and Swiss Re offered contrasting opinions on the role that brokers will play going forward.
There are indications that a new service layer has been forming in the re/insurance industry as brokers appear to be increasingly coming into competition with reinsurers and risk modellers with regard to services such as portfolio management.
Andy Marcell, Chief Executive Officer (CEO) of Reinsurance Solutions at broker Aon, acknowledged that on the transactional side of business, reinsurers are now providing many similar services, but maintained that brokers continue to play a fundamental role in the value chain.
“At the core, the risk premium has to flow into the reinsurers or ILS funds, and in that sense you need to have original clients,” he explained.
“And in order to win those original clients and have relationships with those original clients, the breadth of services we deliver to them runs the gamut from point of sales tools, portfolio management and cat modelling, bringing in our partner firms at Aon to help them manage and mitigate operational costs, and in some cases asset management advisory services.”
Marcell said that, in this sense, brokers occupy an essential place in the value chain and are even continuing to expand the services they offer in this space in terms of winning original clients and building relationships.
“Because we have those strong relationships and we’re privileged to represent them, there are reinsurance premiums that are associated with that,” said Marcell. “So that last piece of the chain – how it is delivered and how to find solutions for those customers – whatever is the most efficient way to do that on their behalf, that’s our job.”
However, Moses Ojeisekhoba, CEO of Reinsurance at Swiss Re, was more sceptical about the enduring role of brokers in the value chain.
He explained that, while Swiss Re still relies on brokers and other intermediaries for about half of its business on the Property and Casualty (P&C) side, in other lines, such as Life & Health, over 95% of business comes directly to the company.
“I think the position we’ve also taken in the firm is that ultimately the customer decides which path they want to utilise to get to us as a reinsurer,” Ojeisekhoba said at Swiss Re press briefing. “We never discourage the customers, we tell the customers to choose what’s best for them.”
He added that, with different players increasingly competing for space across the value chain, its important for the industry to assess who brings value and who doesn’t.
Ojeisekhoba stressed that this does not mean brokers no longer bring value, but maintained that “you have to look at that chain and see who brings value. And that’s at the insurer level, the consumer, the intermediator.”
“If you don’t,” he added, “it is my firm belief that over time the market will eventually have a verdict for you in terms of whether you bring value. And so I think that everyone is working very hard to ensure that they bring value to the chain.”