View from the top: An endangered species?

A recent global broker ranking table analysing 2010 revenues makes stark reading. It disappointingly showed that only two of the top 20 are UK-headquartered — Cooper Gay and JLT. Our other domestic players are well down the list.

It’s little wonder then that THB is in talks to be acquired by Am Wins, as a sale is perhaps many smaller brokers’ best route for survival. There are also rumours about other UK brokers being bought by large US players. We will have to wait and see if these deals materialise, but this trading squeeze raises the question of how many UK Lloyd’s brokers will survive.

Driving economies of scale through expansion in the UK or internationally could be one answer, but many seem to be looking at this strategy in isolation rather than combining the approach with market reform.

It also beggars belief that brokers are still walking through the City streets armed with paper, propagating the duplication of data inputting. This inexcusable inefficiency means that London remains the most expensive place in which to do business.

To compound matters, increased regulation by the Financial Services Authority is making it very difficult for smaller brokers to trade. The cost of compliance is huge and it is the small brokers that are most affected.

On the upside, the UK is known for its entrepreneurial spirit and I hope the increase in the overall cost of entry into the London market won’t deter business creators from forming the next generation of Lloyd’s brokers.

Taking all of these issues into account, are London-
domiciled Lloyd’s brokers going to be a thing of the past? I, for one, hope not.

But the market will have to change its mindset to prevent the demise of many UK brokers. On one side, for example, syndicates that say they want to do business outside of the ‘big three’ need to follow through with these promises. On the other, brokers must embrace change, drive efficiency and create new opportunities.

Putting sentiment to one side, the UK-domiciled Lloyd’s broker may well be an endangered species, but there is still time to take positive action to prevent the extinction of this world-renowned source of expertise.

Toby Esser is group chief executive of Cooper Gay Swett 
& Crawford