Whether a broker is sunning himself in Bermuda or shivering in Aberdeen, with all the new technology on offer they could be sitting in the next office to each other.

In theory, intermediaries can ...

Whether a broker is sunning himself in Bermuda or shivering in Aberdeen, with all the new technology on offer they could be sitting in the next office to each other.

In theory, intermediaries can place a risk regardless of where they live or what time zone they are operating in by the touch of a button. But are brokers actually embracing these opportunities, or do they tend to conduct business solely in the area where they are based?

London, frequently regarded as the main "regional hot spot" and the centre of the global insurance market, illustrates both an eagerness and also a reluctance to alter old ways.

"Brokers cannot live without us," says Lloyd's spokesman Adrian Beeby. "It is a symbiotic relationship, as both need to be there. We are the centre of the London Market and are the reason for it. Specialist brokers in the City need us.

"Regional ones could survive without the London Market, but many have found ways to work with us, especially in sectors like motor."

Earlier this year, Lloyd's opened its doors and encouraged brokers from around the world to apply for membership to trade at Lloyd's. Almost 300 companies globally expressed interest and, in June, the first wave of new brokers was accepted.

One of the main attractions of operating at Lloyd's is the range of cover available. It not only provides insurance for commercial lines, but is also renown for higher risk speciality or "exotic risk" cover, such as kidnap and ransom, credit risk, trade deals and high-value personal accident cover. Around 40% of its business is reinsurance.

"The amount of brokers that need us depends on what line of business they are writing," admits Beeby. "But there are certain types of cover insureds do not find anywhere else in the world."

Some brokers throughout the country are certainly keen to expand beyond the area where they are based.

For example, Link currently provides opportunities to place commercial and personal lines cover and is backed by Lloyd's managing agent Kiln. The syndicate, which launched in 1972, gives a binding authority to transact insurance deals with other high street brokers and has 3,500 agencies on its books.

Easy communication
Link works with brokers in city centres and rural areas, from Land's End to John O'Groats. This year, it estimates £50m of business will come from motor cover, with the rest totalling around £20m.

"Communications are very simple these days, with the advent of technology," explains agency manager Paul Copeland.

"It shouldn't make a difference whether a broker is in Aberdeen or Knightsbridge.

"The security at Lloyd's and the protection it offers helps to prevent any debacles. It is vital that insureds have the opportunity to access the Lloyd's Market either through us, or via a Lloyd's broker."

Other Lloyd's syndicates, such as Markel 702, use London as their main base and have branches throughout the country. Markel also has offices in Leeds, Birmingham, Manchester and Reigate, plus a further three in Australia. It has worked in provincial broking for ten years.

Active underwriter Andreas Loucaides explains: "We've always held the view that we need to offer our services and products. If we were to just sit behind the box and wait for brokers to give all their business, they will not."

The syndicate, which has a stamp capacity of £95m, relies on its provincial offices to generate considerable revenue. Approximately £20m of risk is written from its branch offices, and they have introduced an online broker system, Activequote, that can turn around a quote instantly.

However, some companies prefer not to dabble in London Market business and will stick to the locations they know best. Last November, CGNU sold Marlborough Underwriting Agency, its wholly owned Lloyd's managing agency, to the Berkshire Hathaway Group. Marlborough managed three active and two run-off syndicates, and had a capacity of £285m for the 2000 year of account.

Making priorities
At the time, group chief executive Bob Scott said the withdrawal from the London Market would allow CGNU to concentrate on personal and small commercial lines business.

"These actions will improve the quality of the group's future earnings by removing the uncertainties relating to London Market risks and any further exposure to this business," he said. "This completes the major repositioning of general insurance business which would have any material financial consequence for the group."

Other players, such as broker Thomas Carroll in Caerphilly, also tend to concentrate on working in one set area.

Director Paul Gardiner says: "There are a lot of benefits to using someone based in the area - we know our clients and are just around the corner, so can be with a customer the same day to help them with their problems.

"Regional brokers are also able to provide a service that the national ones cannot.

We can still make money out of sending someone along to help with a claim, while a national broker is more likely to put something in the post."

But Gardiner says regional brokers are struggling to survive in current market conditions. Thomas Carroll, which has been operating for 30 years and has 75 employees, has acquired 15 of its South Wales rivals over the past few years."

Competition rules
The number of brokers is dwindling because of competitiveness," Gardiner says. "Insurers do look to deal in the provinces as to where there is profit, but they are choosy as to whom they give preferential treatment. The size, profile, management structure and long-term ambitions of the regional broker are taken into account."

Although some intermediaries deliberately choose to steer clear of business outside the area, others are eager to expand - even if they are based in another country.

Lloyd's currently has licenses in more than 60 countries and 67% of its premium income derives from overseas, with North America providing the majority of that. It is now looking to develop its presence in China, Brazil and India.

Julian James, director of worldwide markets, says: "We want to focus on further developing our relationships with regulators and brokers around the world.

"The common ingredient of success lies in the desire to develop relationships, and with the changes in technology and underwriters travelling ever more widely, brokers who are physically removed from the Lloyd's Market are better able to understand what is going on there. They can also now decide if it is a market they want to deal with.

"Our job at Lloyd's is not to dictate how business gets to the market, but rather to work to make sure that the market is as transparent and open as possible. Only then can people make informed, commercial choices about how and if they do business with us, regardless of where they are working from."

Case study
FOLGATE Insurance, whose head office is in Dorset, is a broker-only company that deliberately shies away from operating in the London Market.

Instead, it prefers to write business through provincial brokers who will work with the insurer for long-term profit. It also has offices in St Albans, Maidstone and Birmingham.

"We do deal with brokers in the City, but not in respect of any London Market business," explains commercial lines underwriting manager Mick Husband.

Through its panel of regional brokers, Folgate individually underwrites a property-biased account with target premiums between £2,500 and £25,000.

It provides cover for property owners, golf clubs, group personal accident and commercial combined business, including low to medium hazard liability risks.

On the commercial side, it works with approximately 175 brokers nationally, of which 30 are included within the company's "preferred partner panel".

Mike Bridge, commercial sales and operations manager, says: "We operate a selective agency base and are looking to trade with no more than 250 brokers nationally."

Brokers who commit to achieving £250,000 worth of business within a three-year period are given extra rewards, such as a share in profit and closer presence from the insurance company's management team.

They also benefit from more face-to-face contact with underwriters, plus opportunities to go on training courses and receive marketing support.

Bridge adds: "There are currently 30 regional brokers on the panel, with space for another 20. We meet regularly with them in groups to exchange views and ideas and they make a valuable contribution to our strategy."