For those who broker non-life policies, times are tough. Yvette Essen explains why Lloyd's may be the answer
If you're broking non-life policies, times are tough. Huge premium hikes mean capacity is short and, while some new capacity is coming to the market, it is earmarked for good risks, with good claims records.
So what's a broker to do? One option for intermediaries is to take their business overseas to Lloyd's of London where insurers are renowned for their flexibility. This year, underwriters in the 314-year-old market will write €20.1bn (£12.2bn) worth of premiums. Modern communications mean broking deals in London without crossing the Irish Sea is easier than ever before.
Philip Caswell, director of Dublin-based Bohan Hoey Phelan (BHP) Insurances, has dealt with Lloyd's for the last ten years. He first used underwriters when he was a junior at Bain Clarkson and continued to deal with them at Alan Tierney and Partners in 1990 and then at Willis International Network five years later.
In August 1998, Caswell was one of the founding directors of BHP, specialising in commercial, leisure and entertainment risks, including property, liability and manufacture, retail and wholesale. This year, BHP's overall turnover is expected to be in excess of €13m (£8m), with between 30% and 40% of its business being placed at Lloyd's. With that much of the business at stake, visits to the market are required, says Caswell. The BHP directors take it in turns to visit Lloyd's. Until last month, Caswell had never been. But his number came up and a trip was organised to Lloyd's and Insurance Ireland tagged along to find out whether the expense was justified.
BHP gains access to the underwriters through registered Lloyd's brokers, such as NIB Lees Preston. NIB places business in the market on Caswell's behalf, talking a percentage of commission. Caswell describes the cost as "incidental" compared to the ease with which it is placed.
"The Irish market is small, so we need an alternative," he explains. "It is very limited in certain classes, such as entertainment, and is not keen on high risk liabilities. We therefore need to utilise Lloyd's.
"It is an easily accessible market for us with our connections and we can come and visit. If we send over a submission and the quotations are acceptable, the risk will be placed within 48 hours. It takes the same time to place business locally and at Lloyd's."
Still Caswell says a trip to Lloyd's is necessary, if only to get a feel for the market and his business contacts.
Diary of a trip to Lloyd's
Caswell has an early breakfast as Ryanair serve limited food. The drive from his home in County Kildare to Dublin Airport only takes 40 minutes as there is little traffic. After checking in his suitcase, Caswell buys a coffee and a copy of the Irish Times.
Although passengers board the plane, there is a 45-minute delay. The journey is one hour, so it is possible to visit London in a day. But Caswell has bought a package deal as he will be staying for the weekend to visit friends. Return flights, three nights accommodation at the Kings Cross Road Hotel and tickets to the Arsenal v. Liverpool football match costs €380 (£232).
The three-quarters-full plane arrives at London Stansted and Caswell collects his luggage in around ten minutes.
Although other company directors visit the UK on a regular basis, this is Caswell's first trip to Lloyd's, so NIB Lees Preston director Colin Sampson will be looking after him for the day. Caswell has deliberately planned to spend the time networking and strengthening his contacts. "Next time will obviously be more about placing risks," he says. "I just want to meet people, see the place and get a general feel for it."
Caswell catches the Stansted Express to Liverpool Street. He bought his standard class ticket on the plane for €28 (£17) and is expected at NIB's offices in the next couple of hours.
After the train pulls in, Caswell buys a box of Nurofen from Boots to break some English notes for the cab. He says they may be useful as he "knows what the weekend is going to be like". He then pays €8 (£4.8) for a black cab to NIB's office in the Minories.
Caswell and Sampson immediately have a meeting to discuss a couple of property cases. One underwriter doesn't want to renew cover on a public house. Caswell convinces Sampson that although the property needs repairs and planning approval, after two to three months and
€600,00 (£370,000) of investment, it will be a good asset. Sampson agrees to broke the risk.
They also discuss renewals as premiums have risen from 20% to 300% for commercial property liability on factories, hotels and nightclubs. "Pricing has gone up so much clients are looking for renewal terms three to four weeks in advance at least," explains Caswell.
Caswell and Sampson join Paul Burke, director of Burke & Associates, three underwriters and another NIB broker for lunch in the boardroom. "It is more of a social event than a business one," admits Caswell. "We have met many of them before in Dublin, but we are returning the call."
The group is very relaxed and exchanges gossip about Lloyd's - what everyone else is doing, price increases, who brokers deal with and what classes of business are being underwritten. They also briefly discuss a €300,000 (£182,882) liability property risk." Caswell admits he discovers little that is news to him.
Socialising is at the heart of Caswell's visit. He says building relationships with business partners is fundamental.
"It is very important as it provokes trust," he says. "They get to know who is sending the business and we get to know who is writing it. It is safer to deal with someone face to face as people are more guarded over the phone. No-one likes emails or voicemail as they are so impersonal. It is human nature."
The underwriters leave and one informs Caswell he will be coming to Ireland. Caswell tells him to call him when he visits. "I will buy him a pint when he comes over," he says. "This is an ongoing relationship. It is also about making friends in the market."
Caswell, Sampson and Burke head to Lloyd's. Caswell has seen pictures of the building in films. "You don't have to be involved in insurance to know that the building looks like," he says. But when Caswell walks around the market, he is amazed by its size. "I have never seen anything like it before," he says.
As part of his tour, Sampson points out how marine underwriters occupy the lower floors, while other insurers are based in the higher galleries. He also describes the "pecking order" where brokers queue to see an underwriter.
The trio visit Kiln, which does a lot of business with BHP, but the box is empty. Then they go to Wellington and Trenwick's boxes. Again no joy.
Sampson introduces Caswell to the complete Lloyd's lifestyle - the bars. They have a few beers in various wine bars, join another of Sampson's colleagues and his wife, then walk to London Bridge where they have an 8pm dinner reservation.
Two football matches and many drinks later, Caswell boards his plane home. He says the Nurofen was used "for a cold" and describes the weekend as "absolutely productive".
The most valuable part of the trip has been the opportunity to network and Caswell now plans to return in the next six months to discuss particular risks.
"All the people I spoke to I can actually picture now," he says. "It is a lot easier when I know someone, then I can talk to them. We would survive without Lloyd's, but it would make things much more difficult."
Was it worth it?
Cost: €416 (£253)
Benefit: One risk placed, one property risk discussed. But the networking was "absolutely worth it".