‘Size does matter’ – Howden Tiger in line for the big boy premiums
Newly betrothed brokers Howden & TigerRisk will take a palpable premium for joining the mega broker club while their addition to the industry leader board could mean some downward pressure on re/insurance rates.
“Size really does matter,” Panmure Gordon insurance analyst Barrie Cornes (pictured) told Intelligent Insurer of his read on the industry’s decades-old merger-mania.
The relentlessness of the consolidation craze speaks for itself: top players like Marsh and Aon keep adding on for a reason, pressing even to the point where anti-trust regulators step in, as with Aon-Willis Towers Watson. Smaller names are nearly forced to follow suit.
“There is a race for size, so it is not surprising the likes of Howden and TigerRisk tie up.”
Above and beyond the major cost synergies on the consolidation, the new Howden- Tiger will be padding its top line with the improved terms of business it can strike with the major insurers.
The bigger target: “your ability to flex the TOBA - terms of business agreement,” Cornes said. “The more business you put through, the better the returns you get in terms of fees and commissions.”
While the new Howden- Tiger broker improves its take from trade, insurers should be looking around for downward pressure on their own insurance rates as the mega-broker club takes on a new member fighting with leverage for its commercial clients, Cornes suggested.
The addition of a new major player “will add a bit of downward pressure on the rate environment,” Cornes said. Howden’s profile in cross commercial insurance and reinsurance should tell the story of where to look. Brokers are lightly more pressed in the struggle to “do the best they can for clients … and get the best prices out of insurers.”
Whether that will be measurable on a market that had been easing timidly before running into Ukraine conflict fears and inflation in select lines remains anybody’s guess. “But it will add to the overall pressure on insurance companies to cut rates when risk starts easing.”
Howden- Tiger appeared to signal a pending competitive drive. “People want choice," TigerRisk chief Rod Fox said. Clients will "benefit from our distinctively different approach. We will be very bold.”
Comments follow confirmation that broker group Howden Group Holdings will buy rival TigerRisk Partners to create what Howden calls a $30bn GWP business with an enterprise value of over $13bn, employing 12,000 people across 45 countries.
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