Commercial non-life insurance takes hold globally

The firm’s research shows that the global market for commercial non-life insurance broking will accelerate in the years leading up to 2016 driven by strong growth in the underlying market for commercial non-life insurance premiums in North America and emerging markets and the increasing importance of brokers in the intermediation of insurance policies for small and large businesses in the majority of countries surveyed.

Finaccord estimates global commercial non-life insurance broking revenues at US$46.26 billion in 2012, up from $41.90 billion in 2008. While most markets in Europe saw only moderate increases or declines in revenue over that period, emerging markets experienced high growth rates, led by India with a nominal compound annual growth rate of 36.3 per cent from 2008-12, followed by Argentina and China with annual increases of 28.0 per cent and 22.4 per cent.

As far as the geographical distribution of broking revenues is concerned, taken together, Canada and the US accounted for 50.8 per cent of the global market in 2012. This was a consequence of the enormous value of premiums in the underlying market for commercial non-life insurance in North America and the fact that brokers, including independent agents, dominate distribution in both Canada and the US. 

The share of brokers, as opposed to tied agents or direct sales, in the distribution of commercial non-life insurance in Canada is estimated to be the highest in the world at 96.3 per cent while in the US, brokers are also dominant with 73 per cent.

The global market for commercial non-life insurance broking will further increase to $55.43 billion in the years to 2016. From 2012-16, the share of North America within the global total is likely to decline slightly to 50.1 per cent, while Europe is expected to experience a sharper drop from 29.0 per cent to 26.6 per cent.

“Brokers in North America will benefit from healthy growth rates in the underlying market for commercial insurance,” Bernd Bergmann, a consultant at Finaccord, said yesterday. 

“Meanwhile, while brokers in Europe are generally gaining at the expense of other distribution channels, growth in their revenues is limited by the mediocre dynamics in commercial insurance premiums, which are likely to experience a slow recovery from the difficult market environment that characterised the years from 2008 to 2012.”

Countries elsewhere in the world outside Europe and North America are expected to see their share of global commercial non-life insurance broking revenues grow from 20.2 per cent to 23.4 per cent. India is expected to enjoy the highest growth rate. It is likely to more than double its existing market for commercial non-life insurance broking revenues from 2012-16.

 

Small role 

“Outside Europe and North America, the significance of brokers as intermediaries of commercial non-life insurance can vary dramatically as they play only a very small role in some countries, such as Japan where multi-tied agents are far more important, while brokers dominate the distribution of commercial lines in Argentina, Australia, Brazil and South Africa among other countries. Crucially, they also account for a rapidly rising proportion of the market in China and India,” Bergmann said.

Among the leading commercial lines brokers in each of the 30 markets investigated, Aon and Marsh are by far the largest players in global commercial non-life insurance broking with Aon estimated to account for about 13 per cent of global revenues ahead of Marsh with 11 per cent and Willis with 3 per cent. 

Aon has only a marginally higher market share in North America than Marsh, but a bigger lead over Marsh in Europe and the rest of the world.

Across the 30 countries, Aon was found to be the market leader in commercial lines broking in 16 countries ahead of Marsh, which was the largest in eight. There were six countries where neither of these two international groups was the market leader – Austria, China, Denmark, France, Portugal and Switzerland.

“Due to their frequent acquisitions, both Aon and Marsh tend to grow faster than the overall market in most countries. However, outside of the major markets, the pool of viable acquisition targets can often be limited. In the future, it is reasonable to expect that Aon and Marsh will continue to grow their share of global commercial lines broking revenues ,” he said.