The CEO of the UK's largest broker has defended broker facilities, as an official probe into allegations the practice is anti-competitive continues.
Chris Lay, Marsh UK and Ireland CEO, pictured, said facilities were “actually a good thing”, as they increase competition among insurers and bring business to the London market.
He spoke on the issue as the Financial Conduct Authority is preparing to release a market study to assess how competition is working in the wholesale insurance broker sector, with a focus on facilities.
“It’s something that we’ve been working on with the FCA,” he said. “We have a common goal along with the London market, to ensure that the London market works in the best interest of its clients. It’s a shared goal.”
In recent years, London has seen an increasing number of facilities, whereby brokers bundle portions of their account and place them in the market as a block of business.
Insurers have complained about the practice. In his annual letter to shareholders published last year, Chubb CEO Evan Greenberg warned of “abusive behaviour on the part of some brokers who enrich themselves at the expense of both their customers and underwriters”.
“Larger brokers may be using their market power to oblige insurers to sign up to these facilities or pay for wider services,” the FCA wrote at the time. “Also, there may be additional incentives for brokers to place business in facilities even where it may not be the best option for their clients.”
Lay, who was appointed UK and Ireland CEO in April, said facilities create value for customers and bring business to London.
“Facilities are actually a good thing,” he added. “They can be a means by which you can help clients secure increased capacity, enhance policy terms, deliver better premiums and also drive competition among insurers. That’s not a bad thing. They can be a real driver of client benefit for those reasons.
“At Marsh, we take a very principled approach to facilities.That principled approach is that we create and place facilities only if they are in the client’s interest and that comes first. They are a means by which we innovate in the market, deliver benefits for our clients. And transparency and governance around that is key.
“They do bring business to the London market which otherwise might go elsewhere.”
Lay’s comments come as part of a wide-ranging interview with Post to be published later this week.
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