Following the placement service agreements (PSA) scandal in the US, aviation brokers have found a new way to earn commission in a softening market.
Aviation brokers are receiving the so-called profit commission on volume business. Brokers are then insuring the profit in the event that underwriters don't make a profit.
A source said: "The aviation industry is a complete mess and brokers are always trying to find new ways of getting more money."
An aviation underwriter said: "There are underwriters who will insure profit commissions."
The source pointed the finger at Marsh and Aon. "It's definitely going on at Marsh and Aon, but not every aviation broker is doing it, it's happening more on a case by case basis."
Both Marsh and Aon declined to comment.
Industry insiders feel this is a big concern for the aviation industry as profit commissions are detrimental to clients.
A source said: "Profit commissions are counterproductive for clients because any underwriters who refuse to provide this form of commission are automatically left out of the deal."
Another source said: "Clients are unaware of profit commissions because there are ways that you can word it in a contract so that clients remain oblivious."
New York attorney general Eliot Spitzer is leading the PSA inquiry that led to the subpoenas of brokers Aon, Marsh, Willis, Jardine Lloyd Thompson and Chubb.
A source added: "Profit commissions have been running parallel to PSAs for a long time but have not been unearthed because they are less common and a characteristic of soft market conditions.
"These could come back in full force again."
