Distribution, underwriting, distribution

Leo Gibbons seems to have picked the right time to jump on the broker bandwagon.

Two months after he became distribution director at Giles, private equity giant Charterhouse granted the company an acquisition fund of half a billion pounds.

But how much money you have is only one part of the equation, Gibbons explains. Equally important is how you spend it.

"For a consolidator, integration is key," he says. "Integrating technology is a major facet of making the consolidation model work."

Unlike some of their rivals, all of Giles' acquisitions are migrated onto Acturis systems.

"Consolidation is also about involving people, and taking them on the journey," he adds.

Unsurprisingly, Gibbons says that Giles' strength lies in control of its clients. Given that level of control, he explains that the company's aggressive plans to develop its underwriting agency, Ink, is a natural progression.

"The major factor with our underwriting is to increase service standards. The more work transfer we can pull across the better."

Insurers buying insurers
Given the emergence of the consolidators, and the increasing power they are wielding, does Gibbons think we are likely to start seeing consolidation of insurers by insurers?

"I'm sure we will. I think there's an inevitability about it," he says.

“Im sure we will see insurers buying insurers. I dont think thats a bad thing.

"I don't think that's a bad thing. I don't believe that big is the only way. You'll see a lot more start-ups. There are business strategies for smaller players as well."

For insurers, he maintains that there are options other than attempting to cut commissions.

"There is definitely a look from insurers to control commissions. But they've got to control their expense base. Technology could provide the answer.

"The danger for insurers is taking profitability out of the business when the market turns."

Evidently, this turn is some way off.

“It’s difficult to see because it’s not going to be event led," Gibbons says.
"There’s still a lot of capital on insurer’s balance sheets. Some reserves are being released – but I’m not sure it will be enough. There’s still a major amount of competition, particularly in SME."

“I understand why the market wants to talk it up. But most insurers’ view is that it is will be at least a year before we see any strong rate movement.”

Driven by his own company, Gibbons concludes that consolidation will continue for some time to come.

"The capital gains tax changes only made a difference to a select bunch of brokers. But it hasn't affected consolidator pipelines. Provided the business model is sound, we'll see a lot more consolidation this year."

Appropriately enough, he adds: "You'll see a lot more deals with private equity."