ch 7 - brokers and agencies

[DanielZ]

Hi

In chapter 7, page 5, the notes list the participants in the London Market. One of these is described as

"small professional reinsurance companies set up by (or acquired by) large broking firms for the specific purpose of transacting London Market business"

The notes don't elaborate on this point. Can anyone describe this scenario in more detail - e.g. why would the setup be specifically like this?

Another term I'm not certain about in chapter 7 are "underwriting agencies" - page 15 says:

"Underwriting agencies represent a very large source of London Market business. Many of these agencies were formed by brokers."

This again demonstrates the key role played by brokers, but is an underwiting agency a form of broker with the added delegated authority to accept and underwrite risks on behalf of the insurer? Or is the term "broker" not appropriate to apply to an underwriting agent?

Dan

 

[Calum]

I imagine that if you are broking business on the London market, after a while your experience and knowledge of your clients means you arrive at the point where you believe you have a better understanding of the risks you are placing than your underwriters do. So it doesn't seem surprising that a broker would want to start underwriting risk themselves one way or another.