Broker Lineslips: a threat to the market
Broker Lineslips, the practice whereby insurers or reinsurers delegate their underwriting authority to a broker on business that they had traditionally placed in the open market, can be disruptive to the market as a whole.
That is the view of John Goldsmith, the chairman and chief executive of TigerRisk Partners in the UK.
“While history shows us that Broker Lineslips do not stand the test of time, this year’s examples certainly illustrate how disruptive they can be for the market,” he said. “These Lineslips cut off the premium supply to the small to mid-sized underwriters who valuably contribute to creating the depth of the subscription market, but don’t have the clout to protect their signings.”
He went on to say: “These Lineslips are recognised as a threat to the market, but after initial outrage, everything quietens down, even though the lifeblood is being slowly squeezed out of the market.”
Importantly, he believes such arrangements are designed more in the interests of the brokers than the clients.
“Whatever the broker spin, these contracts are designed to generate additional income for the broker. For the brokers to argue that they are drawn up first and foremost with the clients’ interests in mind stretches credibility,” he said.
“Broker Lineslips commoditise the market and permit the brokers to dictate how the business is underwritten and which of their favoured markets can participate.”
According to Goldsmith there has been no real counter-punch to this threat from the market, barring a few strong words. As he put it: “In banking the saying is ‘Too big to fail’, but in insurance it is more a case of ‘Too big to upset!’”
