Andy Swenson, Head of Value Proposition for U.S. Commercial Insurance, was the founding Head of Zurich Wholesale & Surplus, serving in that capacity until October 2019.
Wholesale insurance brokers can be a strong ally in the midst of changing market conditions. While the property/casualty insurance industry has been through a prolonged soft market, a catastrophic hurricane season and an increased number of cyber breaches are expected to impact insurance pricing in property, as well as some other lines of insurance. According to Willis Towers Watson’s 2018 Marketplace Realities report, the long soft market for property is likely over for now.
Wholesalers can be beneficial partners when retail brokers find themselves in a challenging market or with difficult-to-place risks. While much has been written about challenges to the wholesale distribution value proposition, there are three key areas where wholesale brokers continue to bring value:
Expertise – Wholesalers have years of experience within their areas of specialty. As the market becomes more dynamic, it may be worthwhile to align with an established wholesale broker who has been there through soft and hard markets. While some retail brokers have dipped into the excess and surplus market, changing market dynamics, available capital and new risks such as cyber make the use of an experienced wholesale broker a wise choice in today’s dynamic marketplace.
Speed and efficiency – Experience shows that wholesalers are able to more quickly go to market due to their flexibility and open structure. These brokers often have better access to certain insurance markets and that access may prove very beneficial when dealing with difficult-to-place risks. While some retail brokers have expressed concern about the additional cost to go through an intermediary, a recent analysis by Conning, Inc. determined that use of the wholesale distribution channel does not increase the cost of the transaction to the insured.
Strong relationships – As an intermediary, wholesalers focus on relationships with both retail brokers and carriers. Retail brokers look to wholesalers who are knowledgeable about specialized coverages and offer the service capabilities necessary to help place a particular risk. Wholesalers, in turn, look to maintain strong relationships with carriers that can provide the best coverage at an attractive rate. Because wholesalers are capable of helping to place business in both soft and hard markets, they are an important part of the excess and surplus insurance equation.
There is little doubt that the market is changing. In response to these changes, the American Association of Managing General Agents (AAMGA) and National Association of Professional Surplus Lines Offices (NAPSLO) recently announced a merger to form the Wholesale & Specialty Insurance Association (WSIA). The new joint organization will continue to support the wholesale value proposition while ensuring that retail brokers have access to the best carriers for their difficult-to-place risks.
Overall, wholesalers will continue to be a dynamic and valued part of the insurance equation.