UK Regulator to Probe Wholesale Insurance Broking Market
The Financial Conduct Authority said on Monday it would publish the terms of reference for the review on Wednesday at 0700 GMT.
“We want to ensure that the wholesale insurance market is working well and fosters innovation and competition in the interests of a diverse range of consumers,” the FCA said in its business plan back in April, when it said it would examine the market.
“Following the publication of this market study, we will consider appropriate remedial actions,” it said.
The FCA declined to elaborate on Monday.
Wholesale brokers mediate between sellers of insurance to consumers and the insurance underwriters, and often specialize in certain types of insurance.
Evan Greenberg, chairman and chief executive of insurer Chubb, told shareholders in April that the “soft” insurance market was a sign of “abusive behavior” by some brokers who “enrich themselves at the expense of both their customers and underwriters.”
“These predatory behaviors, which have shown up around the world, and in London in particular, are simply unsustainable from an underwriting perspective and will come back to haunt these brokers,” Greenberg said.
The study is due to be completed by 2019 and the FCA has powers to impose changes on the way the market works or take enforcement action if it discovers unfair practices.
The big broking companies JLT, Aon, Marsh, and Willis Towers Watson and United Insurance Brokers (UIB) said earlier this year they were cooperating with an FCA probe into information-sharing over aviation insurance. The European Commission has taken over that investigation.
Consultancy EY has said it expects insurance firms to be challenged on the value they provide to customers and level of reward they extract in return, which could place further strain on profitability.
“Wholesale brokerage seems highly competitive to us but margins are still relatively healthy so there is likely to be plenty for the FCA to investigate,” financial research company Keefe, Bruyette & Woods said in a note on Monday.
(Reporting by Huw Jones and Carolyn Cohn; editing by Greg Mahlich)
- Chubb CEO Greenberg’s Comments on ‘Abusive’ Broker Behavior Not About U.S. Market: Industry Group
- Chubb’s Greenberg Clarifies Criticism of Wholesale Brokers