Stuart Reid says small brokers are being shut out

' Distribution in the regional market is changing and changing fast. Whether these changes are part of the age old cyclical nature of our market remains to be seen but if not, I believe many smaller brokers are in danger of being left behind.

I can cite many examples of what is changing: the recent Fusion deal, Towergate's capacity deal with Wellington that was subsequently moved to AXA, outsourcing of claims services and binders and much more.

I can also cite many reasons as to why this may be happening: softening rates, availability of capital, insurers' desire for growth and their desire for ever reducing overheads.

Where does this leave the average UK broker? Well the Fusion deal means, so I hear, that to secure a quotation on Fusion-held business you will need to obtain a letter of appointment along with a specific request from the client to obtain terms with Allianz Cornhill, AXA, Norwich Union or Royal & SunAlliance.

With much of the future £2bn Towergate empire no doubt going into Fusion this will be a significant block of business that will be "difficult" for any broker to quote against.

Capacity deals too confuse a market that used to be so simple. These are a way for an insurer to hand over the underwriting, to preferred partners, in a more sophisticated way than a binder. Good way to secure large amounts of business without the need for a large infrastructure and also a great way for the recipient to set rates and appear as another supplier. This brings what seems to be a new insurer to market and one who will choose its agency base very carefully.

Are we therefore finally seeing what has been discussed for years: insurers becoming solely capital providers? But, despite handing over some core activities/capacity, most insurers have spent years and many millions building up their brands which they will not give up. Far from it, brand will be used in many ways, to diversify, cross-sell and much more.

The changes could however leave the smaller brokers exposed. The "land grab" that is occurring in some of the larger regionals is becoming understandable. With size comes influence and purchasing power.

Would insurers have agreed to the Fusion deal if they did not have so much to lose? Would insurers be handing out capacity to brokers with small or unprofitable accounts?

As they would say further North from where I write - it is time to get on the Chairmoanal Overcoat and stick up for the regional broker. Biba is doing great work in this area and deserves our backing. If not I fear there are further difficult times ahead. IT

' Stuart Reid is chief executive of Stuart Alexander