UK financial services watchdog to investigate wholesale
insurance brokers
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[November 06, 2017]
LONDON (Reuters) - Britain's
financial services industry regulator is to launch later this week a
long-promised investigation into competition in the wholesale insurance
broking market, where one top executive has complained of "abusive
behavior".
The Financial Conduct Authority said on Monday it would publish the
terms of reference for the review on Wednesday at 0700 GMT.
"We want to ensure that the wholesale insurance market is working well
and fosters innovation and competition in the interests of a diverse
range of consumers," the FCA said in its business plan back in April,
when it said it would examine the market.
"Following the publication of this market study, we will consider
appropriate remedial actions," it said.
The FCA declined to elaborate on Monday.
Wholesale brokers mediate between sellers of insurance to consumers and
the insurance underwriters, and often specialize in certain types of
insurance.
Evan Greenberg, chairman and chief executive of insurer Chubb <CB.N>,
told shareholders in April that the "soft" insurance market was a sign
of "abusive behavior" by some brokers who "enrich themselves at the
expense of both their customers and underwriters".
"These predatory behaviors, which have shown up around the world, and in
London in particular, are simply unsustainable from an underwriting
perspective and will come back to haunt these brokers," Greenberg said.
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The logo of the new Financial Conduct Authority (FCA) is seen at the
agency's headquarters in the Canary Wharf business district of
London April 1, 2013. REUTERS/Chris Helgren
The study is due to be completed by 2019 and the FCA has powers to impose
changes on the way the market works or take enforcement action if it discovers
unfair practices.
The big broking companies JLT <JLT.L>, Aon <AON.L>, Marsh <MMC.N>, and Willis
Towers Watson <WLTW.O> and United Insurance Brokers (UIB) said earlier this year
they were cooperating with an FCA probe into information-sharing over aviation
insurance. The European Commission has taken over that investigation.
Consultancy EY has said it expects insurance firms to be challenged on the value
they provide to customers and level of reward they extract in return, which
could place further strain on profitability.
"Wholesale brokerage seems highly competitive to us but margins are still
relatively healthy so there is likely to be plenty for the FCA to investigate,"
financial research company Keefe, Bruyette & Woods said in a note on Monday.
(Reporting by Huw Jones and Carolyn Cohn; Editing by Greg Mahlich)
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