NERA’s Role in the FCA’s Wholesale Insurance Brokers Market Study

Grant Saggers

The Situation

NERA Economic Consulting is pleased to have advised two market-leading insurance and reinsurance brokers, Marsh and Guy Carpenter, through the Financial Conduct Authority’s (FCA) market study into competition in the London insurance market (LIM).

The LIM is one of the largest global centres for placing and underwriting large-scale, complex commercial and specialty risk. In 2017, it controlled approximately £60 billion in gross written premium and serves as a hub for large commercial and specialty risk underwriters. It attracts clients from all over the world.

The FCA conducted an in-depth empirical study of competition between brokers and how conflicts of interest are handled in the market, formally requesting data and information from more than 100 entities. The FCA analysed the market for over a year, assessing whether remedies were needed.

NERA's Role

NERA helped our clients respond to the FCA’s questionnaires and data requests across a range of market segments and types of insurance. NERA assisted in empirical analyses of customer decisions and win-loss data to show that competition was working well and conflicts of interest were managed appropriately. NERA assisted in profitability and pricing analyses.

Because our clients are the leaders in most of the affected market segments, it was crucial that the FCA properly understood the dynamics and drivers of competition, safeguarding the reputations of the LIM and the many parties involved. NERA supported our clients in engaging actively and openly with the FCA on data and empirical issues.

The Result

After almost 18 months, the FCA closed the market study in February 2019, having found no evidence of harm to customers.

The FCA noted: “This was a significant and in-depth analysis of a sizeable and complex market to determine whether clients were at risk of harm. Encouragingly, we found no evidence that they were but we found some areas with scope for improvement and we will work with the industry to ensure these are addressed. We would like to thank the firms and industry groups who participated in the study.”

For more details, please find the full text of the FCA’s Final Report here