Tom Broughton, editor
It’s by no means an ordinary summer. Over the past week alone there have been reports of 1,400 job cuts, global restructuring and further economic gloom. Clients across the UK are feeling the pinch as fuel bills and the cost of living soar, and business begins to batten down the hatches. The clue to the extent of the damage is best viewed at the top of a market with two of the main global players, Munich Re and Warren Buffett’s Berkshire Hathaway, reporting negative performances for the second quarter. And if insurers, and in turn brokers, have not already began to feel the strain, the effect of a global squeeze will begin to trickle down the food chain and into the regions. There is a growing line-up of UK insurers and brokers, which, in this turbulent results season have begun to reduce their cost bases and prepare their stalls for what looks set to be an even gloomier 2009. The inevitable chatter from insurer chief executives has been to talk the market up, but as our results round-up on page 8 indicates, there is a still a divide between those prepared to force rate increases and those feeding off the remains. The disparity in the regions caused by dual pricing strategies also sees renewals rates slowly harden but be ultimately undermined by extraordinary low pitches for new business viewed by many, and especially new online start-ups, as akin to a feeding frenzy in a tank of piranhas. One school of thought is that the upside for brokers in this climate is that as their clients scale back it will force more scrutiny of broker services, and the real professionalism involved in risk management will shine through at the expense of those competing on just price. The extent of the downside however still cannot be measured, especially as inflation continues to rise and the economy is yet to reach its nadir. Uncertainty is continuing, and growth is stagnant apart from a privileged few. How the leading players move to vent and appease these problems should provide the clue to how the market structure may move all over again come the New Year.
* How will the FSA move to scrutinise the new wave of managed general agents? One scenario is that it cannot wait to find out the result of its own review of commission disclosure and has begun to take a very close look at how clients are sometimes sandwiched in between an agent looking after both the interests of a specified insurer and its broking customers. IT