Insurers to become 'venture capitalists'

Insurers will plough cash into the intermediary markets to become more akin to venture capitalists (VC's) as the market consolidates, according to industry experts.

Speaking at Insurance Times' Profitable Business Growth conference, Jonathan Davey, chairman of Primary Broker Services, predicted that the number of intermediaries would shrink as insurers increase the levels of equity being put into the sector in the next ten years.

He said: "Given the need for mainstream insurers to demonstrate shareholder values, they're closely controlling cost and other sorts of mechanisms.

"If you look at the proliferation of new commercial underwriting agencies there's a number of them out there and all use third party capital."

Davey added that brokers would be drawn to consolidators as a means of survival. Furthermore, that mainstream insurers would cut agency cores bases to as little as 200.

Phil Barton, commercial director of Jelf Group, said Davey had made an "interesting point" and added distributors such as Jelf were likely to require capital from insurers to create propositions.

A spokesman for the British Venture Capital Association (BVCA) compared these insurers to "a footballer who usually plays rugby".

Conor Finn, Markel's managing director of non-marine property, said consolidation was healthy for brokers because it creates "opportunities and continually upgrades the industry."

It comes as Alexander Forbes revealed that it is in buyout talks with a consortium of private equity investors, Actis Consortium. The bid, which has been put to the board of directors, requires funding of R8.3bn (£58m).