Putting clients in the spotlight.
Marsh chief executive Martin South has taken the unprecedented move of calling together 200 of his top clients to help them to understand the severity of the financial crisis. Since the news first broke of AIG problems last month, leading brokers have been forced to set up crisis centres to communicate to their clients the exact extent of the problems. The key issue was whether they should move their cover away from the ailing insurer giant or not? Marsh specifically put together a rapid response unit. Additional phone lines were put in and Martin South personally moved to reassure global clients that the situation, whilst unstable, was being managed in the appropriate way. The backdrop to this is that between them, Marsh and Aon clients had millions, if not billions of pounds of premiums placed with AIG.
As the crisis unravelled and the US authorities stepped in, it became clear that AIG had the capital and the capacity to carry on trading and meet claims payment. Its UK chief executive Lex Baugh came out fighting and AIRMIC gave him a platform to communicate a message of reassurance directly to their members, despite half the insurer market privately briefing that it is gravely unfair to have a leading competitor being underwritten by the US government.
Meanwhile the clients were in daily contact with all the leading brokers. The main discussion point again being---do we move business away from AIG or not? The result was that a few stopped placing new business, a few watched and waited whilst a few made public statements of support. Martin South however finally decided it was time to take a lead, resulting in the client summit which is to be held on November 25th.
South has asked CBI boss Richard Lambert to make a key note address in a bid to help the clients really understand how the landscape is changing in context to the wider economy. And he has also invited major insurers to paint a picture of the uncertainty that the unprecedented events have triggered. But most importantly there is to be a Q&A session with the rating agencies. The role of ratings agencies in the financial crisis is likely to come under fierce scrutiny within the coming months, and after all, who could blame a major corporate client if they were never to trust them again given the lack of action in this situation?
The reality is that sophisticated insurance buyers will be forced to look even harder at the safeguards they need to place business. But what Martin South is doing is to take this understanding a step further. Clients need to understand that structural change in the economy accompanied by the onset of recession will mean that their own risk profiles will change. How and where the cover of sophisticated clients is placed will remain critical and their appetite for understanding this process will not diminish. But brokers will need and want to force home the point that the landscape is changing fundamentally, as well as the risk profiles of the masses.