Brokers and managing general agents have expanded their footprints and shares of revenue in the global insurance value chain, particularly in commercial lines, Swiss Re Institute says.

Significant trends include the expansion of the top four global brokers’ analytical and advisory capabilities to “create a moat”, according to the institute’s latest Sigma report.  

Another development is the market share increase of the next 20 brokers, which are more exclusively focused on intermediation than the top four and are acquiring share at a faster rate than their smaller counterparts.

Swiss Re says Marsh McLennan, Aon, Arthur J Gallagher and WTW began expanding rapidly into areas such as risk consulting, data analytics and human capital solutions in the late 2000s, complementing traditional insurance placement and deepening client relationships.

Advisory services accounted for about 35% of top 10 global broker revenue last year, in evidence that the fee-based segment has become more than a peripheral contributor to earnings profiles.

Brokers have performed better than primary property and casualty insurers and reinsurers in most environments for two decades, according to the report.  

Since 2010, insurers and reinsurers have struggled to earn their cost of capital, indicating highly competitive markets.

“Brokers consistently outperform insurers on profitability, benefiting from capital-light business models, rate-driven revenue growth and margin expansion. 

“Risk carriers will face profitability headwinds as they enter an increasingly competitive phase of the underwriting cycle, pointing to a rise in the importance of the underwriting function within the value chain.”

The global P&C market has doubled over the past 20 years to $US2.4 trillion ($3.6 trillion) as innovation results in broader access to coverage through conventional and alternative structures, and it could reach $US4.3 trillion ($6.5 trillion) by 2040, the report says.

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