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Chapter F3 How brokers acquire business

A broker acquires business in the following ways:
• by a direct approach from a ceding insurer which is used to dealing through a broker, probably
because it has a large or complicated reinsurance programme to place that may need the international
connections that the broker has built up;
• through the development of a new form or contract of reinsurance which has been successfully sold to
clients;
• through personal relationships based on past dealings and experience, which have led to an
insurance underwriter offering some of its new or existing business;
• through long-standing business relationships between a ceding insurer and a broking firm which the
insurer considers has a better overall view of international markets, and being in a superior position to
design and place reinsurance programmes compared to the ceding insurer itself;
• through its level of expertise and contacts with reinsurance markets; and
• from intermediary brokers wishing to place reinsurances or retrocessions on behalf of a ceding insurer
or reinsurer, where the intermediary may not have the authority or power to carry out the placement
themselves.

F4 How brokers place business

Brokers provide details of their client’s reinsurance to potential markets by means of a ‘slip’ or in the
London Market by a complete contract. In either case, the document sets out details of the risk to be
placed and it shows the terms and conditions which are to form the contract between the reinsured and
the reinsurer.
Depending upon the location of the broker and the reinsurer, business will be placed in the following
ways:
• locally, with face-to-face negotiation supported by electronic exchanges of data and telephone
calls; or Reference copy for CII Face to Face Training
• internationally, with letters, or increasingly by electronic communication systems (where they exist)
with acceptances, amendments and declinatures being recorded in the broker’s office. Negotiations
with overseas markets may sometimes be by personal contact with the broker travelling with all the
relevant information to the various markets that it wishes to use.

Consider this…
Which medium do you feel is most effective for, say, a broker wishing to place a North American casualty treaty in
the London reinsurance market?

F5 How brokers service clients’ business

Frequently, the broker will be required to perform the functions of the marketing and production
departments of a professional reinsurer and therefore requires experienced staff capable of keeping up
to date with clients’ businesses and needs.
Table 1.1 demonstrates the actions a broker must be able to perform in servicing its clients’ business.

Table 1.1: How brokers service clients’ business

Prepare and collect claims Claims will be negotiated and collected from the range of markets and reinsurers that
have been used for placements and the broker will ensure that claims payments are
passed on to the client in a timely fashion without any undue delay.
Provide market Market intelligence is becoming increasingly important for larger clients. All have an
intelligence integral interest in what is happening in the reinsurance industry and matters that affect
it. Brokers’ clients expect to be fully appraised of market developments.
Arrange reciprocity The broker may also have a role to introduce inwards or reciprocal business for risks
shown to a particular reinsurer. This may be by means of strict reciprocity whereby the
contracting parties make an agreement to offer a specified volume of business in return
for the receipt of a comparable volume of premium from a similar portfolio. Loose
reciprocity applies where a general broad account of reinsurance business is offered in
a two-way flow of business between two insurers.