Novae to limit dependence on mega-brokers

Novae is aiming to reduce its dependence on large brokers over the medium term, the Lloyd’s insurer revealed in its 2010 results statement.

“One of the risks facing Novae and other Lloyd’s-based businesses is an over-dependence on a small number of large brokers,” the statement reads.

“At the same time, alternative business producers can have an important role to play in geographic diversification away from the traditional UK/US focus. Building and maintaining a growing range of business providers, and so mitigating the Group’s dependence on a small number of global brokers, is a key part of Novae’s medium-term strategy.”

Novae said that 41% of its gross written premium came from the three largest brokers – Aon, Marsh and Willis – in 2010, up from 37% in 2009. It added that other large international brokers such as JLT and Miller account for a “significant amount” of group production.

Novae estimated that the big three control 50% of the non-life market.

Novae’s announcement follows comments from JLT chief executive Dominic Burke at his company’s results press conference on Tuesday this week, where he said the big three had an “unhealthy influence” over the market.

Novae chairman John Hastings-Bass, a former JLT executive, joined Burke in criticising brokers’ use of contingent commissions, saying in his chairman’s statement: “One attractive outcome of the Spitzer era was that the relationship between broker and underwriter was made transparent to the policyholder through either regulation or market practice.

"Novae will remain a strong supporter of this principle as attempts are made to erode the achievements of recent years. Our industry lost credibility at that time and we must ensure that this does not happen again.”

Novae made a profit before tax of £35.1m in 2010, a strong improvement over the £4.1m it made in 2009. The combined ratio improved 7.8 points to 91.4% from 99.2%.