Why are outside players muscling into a crowded UK mid-market?

The American insurers Liberty and Travelers, along with Bermudian underwriter Aspen, believe they have spotted a gap in the commercial mid-market, and all announced this year that they are preparing to build new regional teams and offices.

Aspen has this year established offices in Bristol, Birmingham and Glasgow; Liberty is opening new operations in Birmingham and Manchester; and Travelers put together a new underwriting team at its Glasgow office.

By conservative estimates, the trio could pump in an extra £300m capacity in the next couple of years, into what is an already over-crowded space.

So why are they trying to barge in on such a competitive space and what does it mean for the rest of the market?

Why come here?

First, under Solvency II, the more diversified a company is, the less capital it has to hold. Hence they are branching out from their natural speciality and London market territories.

Secondly, they believe they can offer brokers a more comprehensive claims service, reliable points of contact and ‘360º’ risk management proposition.

They believe that companies, typically with turnovers between £5m and £500m, will pay more for a more comprehensive package.

Aspen and Liberty especially will be relying on brokers to make contact directly with their teams.

In essence, they may not be the cheapest, but they promise to be better.

This is opposed to insurers that offer low-cost stripped-down packages. The quotes are frequently commoditised packages rolled out on software systems such as PowerPlace, Acturis and SSP.

Why will it work?

Liberty Mutual Insurance Europe chief executive Sean Rocks says: “We are not going to crash and burn in the market. There will be careful risk selection.

“Our strategy is to create a more value-driven proposition for the customers. We’ll be working with a limited distribution and with selective partners.”

What does this mean for the market?

These moves are not going to intensify the competition too much, as the capacity is pretty small compared to a market worth multibillions.

But it does show that even in a market that is becoming more and more commoditised, there are still opportunities to build strong and service-driven propositions with the brokers.