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NU Online News Service, Nov. 13, 3:40 p.m. EST
NEW YORK—A day after announcing the acquisition of Texas independent agency Insurance Alliance through its Marsh & McLennan Agency subsidiary, Marsh & McLennan President and Chief Executive Officer Brian Duperreault said here that the brokerage could announce several more agencies by the end of the year, and plans to add more agencies in the future as part of its overall strategy.
At the National Underwriter/Ernst & Young 21st Annual Executive Conference for the Property and Casualty Industry, Mr. Duperreault said he has been encouraged by the quality of agencies Marsh has spoken to, but he noted that courting the agencies has taken some time.
Marsh announced the establishment of Marsh & McLennan Agency in October 2008, saying it planned to make it one of the premiere insurance agencies in the United States, offering commercial property and casualty, personal lines, and employee benefits to client across the U.S.
Explaining the brokerage’s justification, Mr. Duperreault said it was determined that Marsh was not as effective as it could be in the small account space. The brokerage had tried to penetrate that client space, he said, but using the same approach used for large accounts was not working.
The brokerage decided to establish a culture and approach separate from Marsh to be successful in this space, and came up with a plan to acquire high-quality regional agencies, Mr. Duperreault said.
Responding to a question from moderator Sam Friedman, group editor-in-chief of National Underwriter Property & Casualty, about why it has taken so long between establishing Marsh & McLennan Agency and acquiring the first agency, Mr. Duperreault explained the process is extensive, and while the inclination is to move more quickly, some agencies are not necessarily inclined to sell right away, and so courting them takes time.
The economic struggles, Mr. Duperreault said, have actually helped, rather than hurt Marsh’s efforts in acquiring agencies. He said while the space is still competitive, some who would normally be interested in acquiring agencies—such as banks and private equity firms—have disappeared amid the recession. Additionally, Mr. Duperreault said times of crisis could push agency owners to consider a sale.
Asked about remarks he made last year regarding an “invisible hard market” emerging in 2009, Mr. Duperreault said he had previously predicted a rise in prices for the year, but a drop in insurable exposures. Mr. Friedman noted that while insurable exposures have dropped, prices did not rise.
Mr. Duperreault replied there was much talk about prices rising, and he noted there may have been a desire to raise rates as well. But ultimately, he said, the market is competitive, and if a company wants to hold onto a good account, it will drop its rates.
He also said companies’ balance sheets were not as damaged by the crisis as might have been expected. Companies still have adequate capital, he said, and that has helped keep prices down.