Tough Times Ahead For Conventional Brokers, Jackson Tells Conference
"Brokers who fail to move beyond conventional, commis-sion business will have tough going in the years ahead," Gary Jon Jackson, Senior Vice President of U.S. RE Corporation, told a recent conference on "Serving the Alternative Market."
The conference was sponsored by the Institute for International Research.
"Managing risk in the future will require the most rigorous analysis of all the ways in which a company's assets can be protected. Likewise, insurers and reinsurers will demand expertise and creative advice from reinsur-ance intermediaries," Mr. Jackson told the conferees.
He predicted substantial growth in the alternative risk transfer markets. "As more capital moves into insurance through banks and investment banks, brokers will be challenged to bring their clients added value by advising on how and when to use these new vehicles," Mr. Jackson said.
"The winners will be those broker-consultants who are qualified to analyze a client's exposures and not only propose, but arrange, a total program of coverage utilizing all the devices. Problem solving versus the conventional approach driven by commissions will be the key to success. Insurance and reinsurance brokers will obtain a growing share of their income from fees, instead of commissions. This will require the ability to un-bundle services to meet the client's needs," he observed.
"Up to now, large corporations have been the primary users of alternative risk transfer techniques," according to Mr. Jackson. "Today, more and more managers of middle market companies are looking to their brokers for advice in this area. Captives and rent-a-captives, risk retention groups, risk purchasing groups, and various forms of finite risk insurance and reinsurance will take an increas-ingly important place in the market," he forecast.
"Over the next few years, securities-grounded insurance will become commonplace. Wall Street will accelerate its move into the insurance arena. Already, derivatives, options, insurance futures, and hedging devices all are in the game. Banks too will move more aggressively into selling and, at some point, underwriting insurance," Mr. Jackson said.