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Efficiently marrying capital to the customer is an intermediary model: Steve Hearn, Ed.

14th September 2017 - Author: Luke Gallin

Steve Hearn, the Group Chief Executive Officer (CEO) of reinsurance broker Ed., in an interview with Reinsurance News, recently discussed the role and relevance of the broker in a rapidly changing risk transfer industry.

Ed broking logoSpeaking to Reinsurance News at the annual meeting of the reinsurance industry in Monte-Carlo, Hearn underlined disruption that’s occurring in the global insurance and reinsurance industry as capital looks to get closer to the risk.

“Capital is unquestionably trying to get closer to the customer. We have a very clunky, extended value chain in the industry, it’s inefficient, and it’s horrific.

“The reality of technology and the reality of the volume of capital in our space, and all of the other forces are going to change the industry,” said Hearn.

In light of low returns, low interest rates and intense competition, both traditional and the expanding pool of alternative capital is looking to get closer to the original source of risk. As this trend has evolved over time, some in the industry have questioned the role of the broker, with market commentary pointing to disintermediation as insurers and reinsurers look for efficiency.

“Capital will keep coming into the industry and that will force the historic value chain to change,” continued Hearn.

On top of the abundance of capital interested in the sector, the rise of technology is starting to impact parts of the insurance world, and disruption is likely to come from many angles, in many shapes. But Hearn doesn’t feel that disintermediation is going to happen, and he was eager to underline the value and relevance of the broker in the new re/insurance world order.

“Some insurers spent some time talking about disintermediation. But I could quite comfortably point at the insurer and say, ‘you’re the ones going to be disintermediated,” said Hearn.

He continued to explain that 60% of global P&C insurance is handled by three brokers.

“They have the customer, the reliability, and the liquidity,” explained Hearn, adding that as capital looks to find the most efficient way to get to the customer, “it’s not going to be through partnering with thousands of insurance companies.”

“I think everybody in the chain has value to add, so it comes back to relevance. And the intermediary is trusted.

“Taking capital and marrying it more efficiently to customers is an intermediary model,” said Hearn.

The market is ripe for disruption, and it’s likely that risk transfer in the years ahead will look very different than it does today, aided by technology and the evolving risk landscape.

But just because the industry is ripe for disruption “doesn’t mean the intermediary is gone,” said Hearn.

Relevance is likely to remain an essential part of any business model across the insurance and reinsurance landscape, something highlighted by Hearn throughout his discussion with Reinsurance News.

And while some might look to disintermediation as a means of getting closer to the risk and increasing efficiency, Hearn and Ed., a broker that has expanded rapidly since its rebranding just over a year ago, feel confident and comfortable that the brokerage community has a very important, essential and ultimately relevant role to play.

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