North by North-west

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Manchester's insurance industry has gained dominance over those of its North-west rivals, and now claims to be the largest and most influential market outside of London. Jamie Dunkley visited the city to speak to some of its leading lights about how they aim to build on this position

A simple train ride into Manchester city centre tells an upbeat story in itself. With the City of Manchester stadium gleaming in the background and construction cranes hovering overhead, the future of the city feels exciting.

Greater Manchester is the commercial capital of the North-west, with an economy worth £40.5bn and a population of 2.5 million, according to the Office of National Statistics. It sits at the head of a region with the highest number of graduate level candidates outside of London and the South-east and above-average levels of business research and development per head of population. The region's priority sectors include aerospace - the largest in the country valued at £3bn; the creative and digital industries, which boast 5000 firms, 63,000 staff and a turnover in excess of £6.45bn each year; and tourism - contributing £7bn to the region and supporting 28 million overnight visitors every calendar year.

The North-west is also home to more than 80 banks and is a thriving centre of venture capital and corporate finance activity. Manchester is also the largest and fastest-growing financial services sector outside of London. According to the North-west Development Agency, it employs around 172,000 people - equating to almost 20% of the region's workforce - and is valued at more than £9bn. The city also boasts a thriving insurance industry.

Growing power base

Alex Stuart, Allianz's regional manager for Manchester, believes the city's insurance market is the strongest outside the capital. The insurer's operation comprises four divisions, employing 65 people in its commercial division, with 40 each in claims and engineering, and a smaller marine division.

"Regional insurance centres are becoming more important as the distribution landscape changes throughout the country," says Mr Stuart. "I'd say Manchester is the second biggest outside London, as it's constantly changing and becoming more sophisticated. Birmingham, Leeds and Glasgow are also significant but this market is particularly strong as every major insurer is represented."

Manchester's insurance industry sits perched between Liverpool to the west and Leeds to the east. Although the latter is a thriving financial centre in its own right, Manchester-based insurers tend to dominate their Merseyside counterparts.

"We have a major office in Manchester and one in Leeds, with responsibility divided clearly between the North-west and North-east," reveals Richard Smith, Zurich's Manchester branch manager. "It feels to me that there is a real dividing line; if you're from Yorkshire, you love Yorkshire and if you're from Lancashire, you love Lancashire. That doesn't just apply to insurance though, that's life.

"Over here, Liverpool is a key city to us, as are places like Preston, but Manchester is the main area. At least 75% of business comes from Manchester because there are some very important brokers located here. The independent, global and national players, plus the consolidators, are all based in the city. There's very little that can't be placed in Manchester.

"I always find this a fascinating place," he continues. "I've worked in various other places - in Birmingham, Bristol, Norwich and Leicester - but Manchester is a real insurance community. We can put to bed at least 96% to 97% of what we see without going to the capital."

Another major insurer with a significant Manchester operation is Groupama, which has based its underwriting centre in the city. Ann Beswick, operations manager, describes it as the "engine room" of Groupama with a "cradle-to-grave operation", playing a key role in acquiring new business and issuing policies - all the way through to adjustments and renewals. The insurer has also set up its broker trading team in Manchester, close to its underwriters.

Antony Broome, commercial manager at QBE's Manchester operation, which re-branded from DA Constable on 1 January 2008, also agrees the city is a must-have location for insurance companies. The insurer has 16 underwriters in its Salford office.

"We've not really had players come and go in Manchester, we've always had insurers unlike somewhere like Newcastle," he says. "This year we celebrate 20 years in the city - we were one of the first companies to set up a regional operation outside of Lloyd's back in 1988. It's a key part of our network."

With insurers well-entrenched throughout the city, the most interesting changes of late have been within the broking market - as the national trend of consolidation, mergers and acquisitions hits the city.

Recent deals have seen Cobra buy UK and Ireland; Bollington buy Greystone; and Verlingue acquire Alec Finch. Even more recently, we have seen Jelf buy Manson Insurance Group and Bridge acquire Chartwell Insurance Brokers. Venture Preference has also gained a foothold in the Manchester market with the acquisition of Chambers and Newman. So, at least as far as ownership is concerned, the broking market landscape is undergoing something of a metamorphosis.

The place to be

"London-centric companies have realised that, if they're going to develop in the north, they have to come to Manchester," says Peter Warburton, director of Bridge Insurance Brokers. "I do see it as the premier market outside of London as there is a lot of expertise and high quality people here. The Manchester market is at a point of dramatic change though, not in terms of insurance companies but on the broking scene.

"Previously, consolidation and acquisition hadn't really touched Manchester like it had other areas such as the Midlands and Leeds. But it's certainly taken off now and there's been a huge amount of change. Henderson (Insurance Brokers) is moving over here and the market is definitely becoming interesting."

Mr Warburton says the broking market still has a close-knit, regional feel, citing the industry's three thriving annual dinner events as a measure of the market's strength. He also feels confident that businesses are in no hurry to leave - unlike Liverpool, which he predicts will see "a decline in its importance in the region".

However, Paul Moors, chairman of the Bollington Group, is less convinced about the strength of the local market, especially when compared directly with the capital city. He explains that his firm, which received investment from Groupama's parent Gan but remains an independent operation, tends to do a lot of its scheme arrangements through insurers' head offices or the London market - rather than the local one.

"Although this market appears strong, and there are several new players arriving - such as Arista, Brit and Novae - it remains a very long way behind London and the City in terms of size, strength and influence. Whether it actually is a strong market is also open to debate. Piecemeal, transactional and individual risks are brokered here, but the major strategy decisions and long-term planning come from London.

"In fact, a lot of London-based brokers punch severely above their weight, simply due to location," continues Mr Moors. "Take (Venture Preference's chief executive) Stuart Reid, for example. He is obviously a very talented individual and now a very important one. But even when it was just Stuart Alexander he was able to have the ear of many insurer chief executives, as well as the press, assisted a great deal by his location. Chris Giles is another example. He forsook the bonny banks of some Scottish river to be closer to where decisions are made.

"I think if we started again, we would probably base our head office in London - rather than a village in Cheshire with 23 pubs."

Quality brokers

Nevertheless, Mr Moors does believe there are some very good quality brokers based in the North-west: "Bridge and Reich spring to mind - but there are some not very good ones too. We're looking at a range of marketing streams to acquire new clients and hope to grow our gross written premium to more than £200m by the end of 2009."

National broker, Heath Lambert also operates in the city, boosting the operation with the appointment of Tom Hayes as its new head in February. The broker has 50 people working in its city centre office and says Manchester is one of the company's largest operations.

"We operate where the deal is," says Mr Hayes. "For some deals we operate locally, but for others, that are best dealt with from London, we go to the capital. However, a lot of clients in the North like to deal with the local market, so it's varied.

"The broking market has become incredibly competitive but we see that as an opportunity as many of our rivals keep changing their structure, which clients don't always like. We try and remain consistent."

Similarly, as far as insurers are concerned, the current changes pose both a challenge and opportunity. Allianz's Mr Stuart claims the market has become smaller due to the "flurry" of consolidation, which is altering its dynamics.

"Traditionally, a lot of the brokers in Manchester have been very strong and independent and the national players are well-established here too. Apart from those that want to centralise their business, we deal with most of them. Oval has just bought in, CCV is making its presence felt and the networks are certainly getting themselves noticed.

"Fortunately for us though, firms like Jelf are still letting Mansons deal with the local market. This is a real benefit because the changes in the distribution network could have meant brokers stopped dealing with local insurers."

The North-west is also the second largest legal centre in the UK, with around 1800 legal services companies based in the region. It has also been described as the worst place in the country for fraud scams, with Howard Dean, head of Beachcroft's claims validation team, claiming fraud costs insurance companies £16bn each year.

Another major player in the region is Halliwells, with partner Kevin Finnigan agreeing that law firms have an important role to play in the local insurance market.

"In May, I'll have been here two years, but there was already a strong insurance department in place," he says. "We conducted a slight reorganisation about six months ago and I chair the insurance division, which turns over £20m a year. Insurance is a big part of Halliwells' business."

He says a big debate continues to be waged - do major insurers want a general law firm or do they want a commercial law firm that has a strong insurance division? "I believe it's the latter; insurance law demands a better skill base now. If insurers want customers to renew with them, they have to make sure policyholders get the best protection from their policies, and part of that is the legal service that comes with it. We sit down and partner our clients - such as AIG or NFU - and ask 'where are you going over the next five years and what do you want from a law firm?'

What a client wants

"We are very keen on establishing centres of excellence; you have to address what the client wants. A client wants you to service every product type, they want the best lawyers in specialist areas - not generalists. Consequently, we've launched dedicated fraud and healthcare teams over the last year and the feedback from the market has been excellent. We really do believe it's the way forward."

Greenwoods Solicitors also entered the Manchester scene last year, opening a city office in November. The operation is headed up by Mike Suddards, who came to the company after 25 years at Beachcroft. He was joined by a team of lawyers including Alexandra Puddy, who deals with catastrophic injury claims and a group of recognised fraud lawyers who will work closely with Greenwoods' counter-fraud unit in London.

Ms Puddy says: "We deal solely in insurance work, we don't deal in anything else. Our head office is in London but we also have offices in Milton Keynes and Bristol. With the Manchester office opening in November, this gives us a truly national scope. Quite often, clients like us to have a local base and this also makes things easier for file location and things like that. Manchester is booming and it's a great city."

Greenwoods describes itself as a firm with aggressive growth plans, with recent appointments from DLA Piper, Beachcroft and Weightmans swelling its ranks. With Kennedys law firm also opening a local office on 1 February this year, it seems there are a healthy number of law firms to service the city's many insurers.

Other areas of the market are becoming equally well-developed with underwriting agencies a prime example. Arista entered the market in January, following its 2007 market launch in Redhill, Southampton and Bristol. Talking to Post in December, chief executive officer Charles Earle said the company aims to write £5m in business from the new office this year.

Regional manager Paul Dooley, who had previously worked for Chubb in the city, says the decision was taken to expand into Manchester after speaking to local brokers.

"We had a great response from North-west brokers and have been very successful since our launch, driven by the frustration many brokers are experiencing regarding poor service levels," he claims. Arista intends to have a 12-strong staff in place by October.

"There is a continuing state of flux in the market," continues Mr Dooley. "With certain insurers driving rates and others pushing for new business, capacity is still readily available, which means difficult trading times for those insurers demanding rate increases. This is potentially difficult for brokers to deal with from a strategy standpoint as they must select their insurer partners carefully when broking each risk and ensure they are not missing an opportunity for their customer. Failure to do this may mean they lose business."

Dual Corporate Risks is another key player in the area, with its Manchester operation "going from strength to strength" since opening in September 2005, according to underwriter Fiona Saggers. She reports that the company is hoping to have a £6m account in the city by the end of next year.

"Dual is a good example of why Manchester is appealing", she says. "We needed an operation outside London and chose to move here. It's an attractive market because if you're any good you can differentiate yourself. On a day-to-day basis, Manchester relies on good relationships between brokers and insurers, and brokers and clients. We have personnel who know how to offer good service and hope to expand over the coming months."

Opportunity knocks

Nick Entwhistle, a chartered loss adjuster at Cunningham Lindsey, agrees the city offers huge opportunities.

"In one shape or another, Cunningham Lindsey has been here since the 1920s," he says. "We have about 90 people working out of the office, with 30 actually based in it and see Manchester as an important part of our regional network.

"We receive lots of port work over in Liverpool, business from the aerospace industry and, of course, construction, which is not surprising considering the amount of redevelopment going on in the city."

You would be hard pushed to not see the promise Manchester offers as an operational base. Indeed, with the BBC set to make the city its largest centre outside of London and a "talent hub" for the North, the future looks distinctly rosy. David Barton, deputy president of the Manchester Insurance Institute - the oldest local institute in the UK - says the future looks positive for the industry too - if it can continue to attract talent to its ranks.

"We mirror what the CII does nationally," he says. "We provide educational support, act as an examination centre and are always mindful of professional standards. In the eyes of the public, insurance doesn't always look the best, so we have a challenge to promote it and attract new talent.

"We have been forging closer links with the universities here and are trying to encourage people to choose insurance as a career, something I see as one of our key roles."

Mr Stuart adds: "The war for talent is huge, there's never enough going about. And the ones that you have, you need to fight very hard to keep. The insurance industry has a bit of an old-fashioned reputation and doesn't attract enough young people."

"The pool of people wanting the jobs is there, but the salaries have to be very high and insurers also need to develop the talent pool they have at their disposal," adds Mr Smith from Zurich.

Although the labour market may be competitive, the sheer volume of companies operating in Manchester should ensure it continues to grow. Indeed, with Royal and Sun Alliance creating four new trading units in the city and new players like Henderson entering the market, Manchester's influence show no sign of waning. The self-proclaimed number two market in the UK looks set to consolidate its position.

KEY FACTS ABOUT THE NORTH-WEST - 2007

The North-west economy is valued at £111bn, ranked 3rd of the UK regions behind London and the South-east, making it Europe's 12th largest economy with 6.8 million people and 242,000 firms. This includes nearly 3000 foreign-owned companies - the highest number outside of London/SE, contributing 16% to the North-west 'gross value added'.

The performance of the North-west economy has been steadily improving since 2000. Between 2000 and 2005, the economy grew by £22bn (27%) to £106bn.

Between 2000 and 2004 the region created 180,000 new jobs and grew at a faster rate than the English average.

Since 1999, the NWDA has created/safeguarded 161 200 jobs; reclaimed 3700 hectares of brownfield land; levered £2.1bn of private sector investment and created 12,000 new businesses.

Source: North West Development Agency

CULTURE AND SPORT

Manchester has been a hotbed of musical activity for many years, producing some of the UK's finest bands: The Buzzcocks, The Fall, The Smiths, Joy Division and latterly The Stone Roses and Oasis.

Joy Division formed an integral part of the Factory Records scene, spearheaded by the late Tony Wilson, who once famously remarked: "I'm a minor player in my own life story."

Sport is also an integral part of the Manchester story, with the city's two famous football teams dominating the headlines. Manchester United, the more successful of the two, marked the 50th anniversary of the Munich Disaster in February this year. The tragedy happened on 6 February 1958, when British European Airways Flight 609 crashed on its third attempt to take off from a slush-covered runway at the Munich-Riem airport in West Germany. On board the plane was the Manchester United football team - nicknamed the Busby Babes - along with a number of supporters and journalists. 23 of the 44 passengers on board the aircraft died in the disaster.


NORTH-WEST SUB-REGIONS
Economy Population
Cheshire £18.2bn 877 000
Cumbria £6.4bn 499 000
Greater Manchester £40.5bn 2 548 000
Lancashire £20.3bn 1440 000
Merseyside (including Halton) £17bn 1486 000

The North-west economy was worth in excess of £102.4bn in 2004 - growing to £106bn in 2006. (Regional Accounts, ONS, December 2006)Source NWDA.


RECENT CONSOLIDATION IN THE MANCHESTER BROKING MARKET

January 2008 Bridge Insurance Brokers buys Chartwell Insurance Brokers

Jelf buys Manson Insurance Brokers

Reich Insurance acquires WB Tidey and Co

December 2007 Venture Preference acquires Chambers and Newman

October 2007 Cobra buys Manchester-based UK and Ireland

Bollington buys Manchester-based Greystone

January 2007 Verlingue buys Alec Finch

February 2006 Broker Network buys Ian Frazer Insurance Brokers

October 2005 J&M Insurance Specialists acquires One Stop.

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