When the going gets tough… … brokers find alternatives and new competitors emerge. Here’s how efforts to find a home for clients’ hard-to-place risks have opened up some new thinking By Terry McMullan
W
hile market domination isn’t always the intention, mergers at the top end of an industry have the potential to crush smaller competitors, or at least limit their opportunities. That’s why the Australian competition regulator expressed disquiet on February 18 about the impending merger of Aon and Willis Towers Watson. Following so soon after the 2019 merger of Marsh and JLT, the Australian Competition and Consumer Commission’s “preliminary concerns” about the impact of the merger on the local market is understandable. The ACCC says Aon, Willis Tower Watson and Marsh “are the only three major brokers capable of providing commercial risk broking to large customers, reinsurance broking and employee benefits services in Australia”. The local regulator’s concerns are similar to those of its UK and European counterparts, and reports from London suggest Willis Re – a significant player in the global reinsurance market – may have to be sold to placate them, despite the protestations of Aon CEO Greg Case that Willis Re is “complementary” to Aon Re. When the dust finally clears with finalisation of the Aon-Willis Towers Watson merger later this year, Marsh will have given up the global broking top spot to Aon. But in Australia, Marsh will still dominate the S&P/ ASX 200 corporate market, with a local market share of more than 50%. The merged Aon-Willis Towers Watson will have a combined local corporate market share of around 28%. Between them, Aon and Marsh will control around 80% of the local corporate market. Marsh has gained additional weight from JLT’s strong specialty profile in the middle market, which is where more of the growth action is happening. For brokers focused on the SME market, the affairs of the corporate market operators may be of little more
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than passing interest. But in the middle market at least, competition is likely to become more intense over the next few years after two cashed-up London brokers announced their arrival in Australia and their determination to make an impact. The first two months of the year have seen three announcements (all reported first by insuranceNEWS.com.au, incidentally) that demonstrate not only the continuing attraction of the Australian insurance market to foreign entrants, but also that insurers’ plummeting risk appetite has led Australian brokers to look overseas for capacity for some willing and able partners. Two of the announcements heralded the arrival in Australia of a pair of heavyweight British broker groups with the financial and technical nous to shake up the entire insurance market and possibly, over time, rattle the corporate market domination of Marsh and Aon as well. In January Steadfast, Australia’s largest locally owned broker network, revealed that London-based international insurance broker Howden has formed a “strategic partnership to support Steadfast’s London Market broking requirements”. The deal brings with it a clear path into the London Market for Steadfast brokers encountering problems placing clients’ hard-to-place risks in the Australian market. Managing Director Robert Kelly says the alliance with Howden is a “clear opportunity in the Australian broking market for a credible international alternative, and for the existing clients of Steadfast members to have access to expertise and capacity in London and globally”. Howden Broking has also moved into the local market as a Steadfast member, promising to take the fight up to the dominant international brokers. Mr Howden says it will be a “challenger broker” for Corporate,
