Tom Broughton considers the future of Towergate

The Towergate story is ultimately one of power. A tale of how an empire has been built to assume it, use it and ultimately negotiate ferociously with it. Michael Faulkner’s special five page report this week delves deep inside the Towergate Empire (see pages 12-16) and provides a fuller picture of the power the company wields, and gives the market’s verdict of this uber consolidator. The insurer community is measured in its response and flits between being grateful for the returns it has received over a consistent period of time and wary of the vulnerable position that being dependent on Towergate dictates. Insurers do not receive the deals they once did and are vulnerable as they cannot afford to lose the massive distribution channel Towergate has built for itself. Peter Cullum, meanwhile, professes that its commissions are not as high as people assume and that basically it offers up a win/win situation for all involved. Oh….and that he’ll probably be fleeing to the hills in two to three years anyway.

So what does it leave us with? For starters, a small group of millionaires content they have spotted a niche and filled it with expert precision. A wider group of wealthy entrepreneurs, who in the right place at the right time, sold their brokerages to Towergate and helped it to gain its valuable leverage. And finally a market left in a vacuum. Cullum will probably let the City dictate Towergate’s succession planning. But what really will become of Towergate once insurers’ finally tweak their strategies to look for harder bargains? Perhaps in the short term Towergate will look to counter this with global expansion and shoot for the reinsurance market and sun drenched Bermuda. But back at home as the likes of Jelf (see pages 8-9) and Giles shoot to perhaps follow the Towergate path and build the same kind of leverage and power, it raises more questions than answers as to where the power will ultimately lie and who will call the shots.

What is for certain is that there are at least half a dozen wealthy insurance entrepreneurs currently tending their gardens who have the inclination and energy to spot the next niche in the market and change the balance of power all over again. The key question that needs answering will not be who and when, but how? IT