Insurance megabroker Marsh revamps marine operation

Top insurance broker Marsh is overhauling its marine business but says there are no plans to scale back operations.

The revamp has attracted market gossip but Marcus Baker, the head of Marsh’s global marine business, said the broker would still be a leader in the sector, fielding a 600-strong team.

Baker was reluctant to use the term "restructuring" for the process under way, but said the broker was looking at all aspects of its business and everything was up for negotiation.

Marsh trimmed its marine operation at the end of last year, with some older members of its team retiring earlier than anticipated and further cuts achieved through natural wastage. But Baker said there were “absolutely no plans to reduce the headcount further”.

“Marine continues to be a very profitable part of our specialty business," he said. "So we’re not going to stop investing or growing it. What we’ve got to work out is what is the best way to do that.”

0a4a31c5455dc5a7af2c0f3f61ceb143 Marcus Baker, head of Marsh’s global marine business Photo: Jim Mulrenan

Marsh is the biggest of the international broking groups, placing $3bn of marine premium per year, with its London operation accounting for 20% of the global portfolio.

“In a few years’ time, the market could be operating in a completely different way," Baker said. "So we have to talk about how to give a better service to clients and our people a broader career. That’s exactly what we are trying to do.”

There has been talk in the market about Marsh having more marine brokers working across specialities, so focused on clients rather than being hull or protection-and-indemnity practitioners.

Baker said it is not as clear cut as that. But when insurance brokers go to see a shipowner, they want to talk about everything rather than a single aspect of risk.

He said Marsh would retain hull, P&I, casualty and cargo teams as big as any in the market. But he wants to develop individuals to be more rounded brokers, better able to have a deeper discussion with high-level clients about all issues — whether it was, for example, cyber risks, employee benefits or trade credit.

“It’d be remiss of me if we were not looking at everything from all angles," he said. "You can’t afford to sit still."

Baker said there is not a simple answer to what was going on at Marsh but the broker was adapting to a changing market.

“If we don’t start thinking more about what we do for clients, then we’re not going to be here for long,” he warned.

“Only last week, Lloyd’s were insisting that PPL become a fundamental tool for every broker and underwriter. We have all got to realise that the days when brokers wandered up to the market with a slip case under their arm to place business are going. Decisions could be made completely over the wire in due course.”

Mandatory drive

PPL stands for Placing Platform Ltd, the London insurance market’s electronic risk-placing initiative that Lloyd’s plans to make mandatory.

Against the background of a challenging shipping market and declining premium levels, all brokers are facing financial pressures.

“One thing for sure in our business is that expenses tend to go in only one direction unless you can manage them in a different way,” Baker said.

He cited the instance of a shipowner who might be spending $1m on hull cover, but only 20% might go into the London market. So that is down to $200,000, with the broker getting 5% or 10%, which represents at best $20,000, or less than £15,000. That is not going to feed many mouths.

There has been talk in recent months of the hull market bottoming out, if not hardening, so how does the business look from Marsh's perspective?

Baker said that, all things being equal and assuming they had a decent loss record, he would not expect clients to pay more for cover this year.

“There is a very broad, highly capitalised direct market for hull, different appetites all over the world and insurers out there that are still looking for market share,” he said.

Against the backdrop that it was still not a great shipping market, the most important thing for Marsh was to give clients choice and identify better ways for them to buy risk protection.

“Part of the advantage about being a global broker is that we can access capital wherever it happens to be the most attractive for our clients,” Baker said.