Lloyd’s of London insurance broker AFL is looking to expand its global marine business in an effort led by Alexander Mott, who believes there is plenty of room for a new entrant despite the recent market troubles.
AFL chairman Toby Esser last year hired Mott — who has close to 20 years of experience as a marine broker — as marine director to develop the company's broking business in the segment.
His appointment was part of AFL's ambitious growth strategy under the leadership of Esser, who has also been on a global acquisition drive in property, casualty, reinsurance and other markets.
Broker concerns
But attempts to expand in marine have raised questions among other brokers in the sector.
For a start, the marine broking market has recently been characterised by consolidation rather than expansion, suggesting that the market is already over supplied.
While huge losses from underwriters, with marine insurers at Lloyd’s reporting a 116% combined ratio last year, has put commissions under pressure.
But Mott sees things differently, claiming there is a demand for brokers who can come up with innovative ideas to create value for shipowners in a hardening market.
“We are a new broker with innovative ideas and a global reach,” he said. “The broking market has become a bit stale over the past few years through merger and acquisition, and it has been crying out for a client-orientated broker, which is what we feel we are.”
Mott said the increasing commoditisation of marine business has benefited volume-based brokerages to the detriment of small and medium-size owners, which have been hit hardest by the hike in rates, despite the fact that they may have good claims records.
As the market hardens, Lloyd’s and other underwriters are adding to owners' pain by limiting the terms of cover. Mott said the smaller owners are getting a “raw deal”.
“A significant reason why the smaller to medium-size shipping operators are affected more than the larger, conglomerate shipping organisations is the fact that many larger insurance buyers enjoy access to larger broker facilities, and obtain competitive pricing with less scrutiny despite not necessarily having better claims records,” he said.
He added that, in current market conditions, more owners are approaching brokers, such as AFL, for a “second opinion”, to see if they can get a better deal.
Innovation needed
Mott said the time is right for innovation and a move away from the commoditised broking that has led to loss-making rates.
He believes a combination of new technology and old-fashioned technical underwriting skills can counter the rising market.
“The strategy of brokers over the last five years has been on volume but with that they have taken their eye off the ball,” he said.
"It is evident the market is hardening and clients are looking for an alternative to that approach, and a broker that understands the marine business.”
But, he said, that could be countered by low interest rates continuing to attract capacity to the market, and as other insurance hubs around the world expand in marine.
