Out of the smoke

Outside the EC3 postcode, the brand name QBE in the UK could mean anything from a software company to a new chain of bars on city centre corners. It is a dilemma that many international insurers and Lloyd's/London market vehicles face when trying to venture further into the UK regions.

Good examples in recent years have been Hiscox, Amlin, Ace and Brit, which through a stroke of luck sponsored The Oval just as England produced an Ashes' winning cricket team.

QBE European Operations chief executive Steve Burns is fully aware of this perception issue. "We are looking for UK penetration. Limit is known within the Lloyd's market for its liability work, but we now want to get the QBE brand out in the regions," he says.

This could mean QBE backing a similar sporting sponsorship in the next six months, he adds, but has not decided "which one or where".

In late 2003 the QBE European operations - and in particular the UK division - began a major restructuring programme. The biggest shake-up took place in the company's Iron Trades division, which it bought in 1995. It was dogged by long-tail asbestosis claims and the brand name was dropped. Burns stepped up from running QBE's Lloyd's business to take over Europe in September 2004.

Today QBE in Europe equals Limit (comprising the 386/DA Constable syndicates and syndicates 566, 1036, and 2000); commercial fleet specialist Ensign; QBE Re; and two acquisitions last year - MiniBus Plus (MBP) and British Marine.

This gives the insurer one of the most diverse commercial lines book of business in Lloyd's and made Limit the largest managing agent in 2005 with A$2.27bn (£915m) of capacity.

Burns said: "In August 2005 we bought MBP which involved bringing a wholesale broker in-house. It has worked and this is something we would like to do again.

"We will decrease our reliance on wholesale brokers. As Spitzer's inquiry showed, it is too London-centric and I don't want us to rely on this so heavily. We have a unique model and great products, but what we need to do is enhance the distribution channels.

"With Ensign and MBP we have a base of regional offices. In the London office, we have underwriters who are bursting to get their products out, but distribution has been the problem," he adds.

Burns' boss Frank O'Halloran was recently in town, on a four-day stopover before flying to New York to look at new opportunities. QBE Group's chief executive has set his sights on replicating its nationwide success in Australia across the US.

"In 1993 we acquired a reinsurance company from Royal Insurance (now R&SA) which has given us a presence in the US. We spent A$50m on it and it is now worth A$1.7bn, all through non-life general insurance. I can see us doing much more there," O'Halloran says.

General insurance business is the core growth market. O'Halloran says this year the QBE Group will consolidate its acquisitions from last year, which included buying a company in Estonia.

"Eastern Europe is a key growth area for general insurance. Next year we will begin looking at insurance companies, not reinsurance companies, but other opportunities in the distribution channel."

In QBE's recent annual report, the company promised to grow gross written premium by 10% for 2006 to A$10.3bn and net earned premium by 12.5% to A$8.3bn. "We expect our growth in 2006 to be supported by an increase in retention of customers," the company added.

Does O'Halloran believe the company is retaining the right clients, or is the strategy to bring disaffected customers back to the fold?

"Of course we are desperate to keep all international customers, and worldwide the retention rate is up to 80%. About 98% of the whole group's business is intermediary-based and we want to keep working with intermediaries to increase that retention."

Lloyd's will remain at the heart of the strategy. Burns joined the Lloyd's franchise board in 2004 and has pushed hard to keep the doors open to long-tail liability classes.

"Lloyd's is still the best place for specialist players like ourselves. My only frustration, and Luke Savage (Lloyd's finance director) knows my feelings well, is that it should be more flexible in allowing the long-tail business to write in the market. If the underwriting is good there should be no problem."

O'Halloran agrees the UK profile will rise and backs the idea for a major sponsorship deal to heighten awareness. "We sponsor the Sydney Swans which won the AFL last year. We just need to find a winning side in the UK to back now," he said. IT

QBE at a glance
QBE's roots can be traced back to 1886 when two Scottish migrants James Burns and Robert Philip formed the North Queensland Insurance Company in Sydney.

Today, the QBE Group has a GWP of A$9.4bn (as of 31 December 2005), making it the 12th largest insurer in IT's Top 50 insurers.

QBE European Operations specialises in commercial lines and writes all the major liability classes. Its target markets for this year are professional indemnity, employers' liability and personal accident for sports professionals.