Entrepreneurial spirit sparks agencies

by Kate Tilley, Resolve Editor

Australians’ entrepreneurial spirit is behind the growth of underwriting agencies in Australia, Lloyd’s country manager Adrian Humphreys told a Brisbane AILA seminar.

He said United Kingdom brokers were more inclined to trust only “big brands”, but the Australian attitude of “everyone gets a go” meant agencies were “picking up the pace because of their expertise”.

Underwriting Agencies Council (UAC) chair John Iles agreed, saying agencies had to rely on service to brokers, transparency and professionalism because “we don’t have big brands”.  Agencies were specialists in niche markets and that was their attraction to brokers. “Agencies have strong underwriting knowledge and are market leaders.” Unlike big brands, they did not have the ability to spread risk across various classes.

Mr Humphreys said many agencies were among Australia’s 107 coverholders at Lloyd’s, including seven service companies, which were syndicates’ branches.

He described the Lloyd’s market as “Disneyland for brokers” because they could access 55 underwriters directly in the same building, which gave them the ability to be flexible with placements.

“Lloyd’s is a society of members that operates as an insurance market; it’s a platform, not an insurance company,” he said. “Lloyd’s accounts for 11.5% of total intermediated premium ($17 billion), which is significant.”

Lloyd’s gross written premium from Australia has grown from $260 million in 2001 to $2.05 billion in 2012.

Lloyd’s Australia grew 36% in 2011, which slowed to 9% in 2012; it is Lloyd’s third largest territory behind the UK and the US. Mr Humphreys says Lloyd’s wants to write business via underwriting agencies in Australia because they are “local people with local expertise”. “The only drawback is we don’t own them, so they can place business elsewhere or be bought.

“Agencies are our eyes and ears on the ground; we can’t decide on risk assessments from London.”

He said binders automatically bound Lloyd’s so the due diligence process for potential coverholders was “very rigorous”. About half Australia’s coverholders had claims authority and 70% of claims were managed in Australia, with 30%, mainly casualty classes, going to London. Agencies that did not want claims authority frequently used third party administrators.

Mr Iles said agencies were innovative and had pioneered many new products, including patent infringement, pluvius, prize indemnity, employment practices liability and statutory liability.

UAC was established because agencies needed their own voice. “We’re not insurers and we’re not brokers,” he said. UAC gave agencies representation; assisted members with statutory and regulatory issues; provided industry recognition; marketed the agency sector; and provided education and development opportunities.  “We’re very proactive in education for members; it’s targeted education specifically for agencies,” Mr Iles said.