The Intelligent Quarterly from the publishers of The Insurance Insider

Spring 2012

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Mark Geoghegan Dear friend,

At this time of year it is customary for editor's letters to begin with well-worn phrases that usually go something like this:

"As the great and the good of the reinsurance world descend once again upon Monte Carlo on the shimmering Cote d'Azur and the champagne begins to flow, frank conversations on the sun-drenched terraces will doubtless turn to X, Y and Z..."

But if you know this publication and its staff well enough you'll also know that's not really our style.
Please forgive our presumption, but rather than second-guessing your choice of pre-prandial conversation topic, we would like to tell you what we think you should be talking about.

"All M&A talk should be strictly for sport and only used to tease hungry looking advisers lurking in the vicinity"

So how do we suggest you fill your 30 minutes of allotted time over Perrier at the Café de Paris?
For one, we think you should definitely reserve a portion in your half-hour slots for discussing the virulent reappearance of various well-worn forms of broker remuneration in this soft market.

The question of how the market compensates brokers always produces as much hysteria from one side as it does paranoia from the other.

And, however such renumeration is described - be it supplemental, enhanced, or the good old-fashioned contingent variety - there is no denying that the subject ought to be right at the top of the conversational agenda and not swept under the carpet.

The remuneration may also take the form of a fee for a particular service such as proprietary data or marketing, or a charge to join a special carriers' relationship programme.

Set aside a minute or two to debate this thorny subject with your peers, but then agree that with the benefit of full disclosure, clients should be left to decide for themselves how exactly they would like broker services to be accounted for and leave it at that.

A quiet word and an update on the Chile numbers should also be de rigueur. The best tactic should be to preface your remarks with the swift production of the dramatic PCS loss development figures for the Northridge earthquake and a deep stare into the whites of your meeting partner's eyes to see whether they blink.

Similar exercises may also be carried out with Deepwater Horizon, structured credit where applicable and the overall worrying decline in terms and conditions we are currently witnessing. In all cases, don't listen to what they say, simply see how they react.

Moving to the subject of the market, discussion of supply, demand and capital needs is one thing, but any time spent trying to work out the likely end of the soft market is probably wasted at a largely social event such as Monte Carlo.

That is, the time is wasted unless you can unearth solid intelligence on who is taking the "cheating" phase of the market rather too literally and politely get off their protections before any harm can be done.

But if this information is not forthcoming it is best to stick to the tried and tested, if tedious, formula of discussing specific shifts in upcoming client buying requirements and changes in carrier risk appetites.

Similarly, all M&A talk should be strictly for sport and only used to tease hungry-looking advisers lurking in the vicinity.

But before the clock ticks down to zero, we also think that anyone with an enquiring mind should be asking their esteemed peers the latest they have heard on what Patrick Ryan is up to.

When anyone with the vision and drive to grow an empire the size of Aon from virtually nothing decides to embark on a radical new venture, it demands the closest possible scrutiny of all his peers. Turn to page 12 to see our take on the RSG adventure so far.

Mark Geoghegan, Editor