Recent consolidation among reinsurance brokers has raised concerns that reinsurance buyers may suffer from a lack of available choice and diminished competition. However, according to Michael O'Halleran, executive chairman of Aon Benfield, a smaller number of reinsurance brokers does not necessarily mean bad news for customers.
"From where I sit, our reinsurance buyers have a significant amount of choice," he tells Reactions. "I don't think the consolidation that continues to take place will have a negative impact for the buyers."
Last September, Chicago-based insurance broker Aon moved to expand its reinsurance operations with the £935m ($1.75bn) acquisition of UK reinsurance broker Benfield. Aon had earlier picked up the US and UK reinsurance brokerage business of Gallagher Re, a subsidiary of Arthur J Gallagher.
In March this year Guy Carpenter, the reinsurance arm of Marsh & McLennan Companies, announced the acquisition of John B Collins Associates, a privately-held company and the seventh-largest reinsurance broker in the world.
The market for top-tier reinsurance brokers is now dominated by just Aon Benfield, Guy Carpenter and Willis Re. But according to O'Halleran, the consolidated market is providing reinsurance buyers with what they want.
"The demand among buyers in the reinsurance marketplace is for increased scope of the services provided, which include more actuarial and financial services," he says. "The growing demand is for sophisticated reinsurance firms that act as brokers, consultants and advisors."
Despite the dwindling number of reinsurance brokers in the marketplace, O'Halleran sees further scope for acquisitions in the market because of the need for smaller brokers to be part of an organisation that can deliver "analytics and the necessary tools you need to compete in today's world".
Following Collins' amalgamation into Guy Carpenter, O'Halleran says the next logical reinsurance broker on the food chain would be Willis Re. However, this is not a realistic target.
"We bought Gallagher Re out of the reinsurance broking business," he says. "The next level is Willis Re, but that would obviously mean acquiring all of Willis, which is not something I would speculate on."
The integration of Benfield into the new Aon Benfield operation is likely to put Aon off picking up any more reinsurance brokers in the short-term. O'Halleran says that Aon Benfield's focus is on organic growth.
"We were the only reinsurance broker last year to have positive organic growth," he says. "We are looking to continue that organic growth despite the significant headwinds. We will certainly look at boutique acquisitions to fill out our position in different parts of the world and we will look at opportunities that fit with our strategic outlook, but there is not anything at this point."