Sources say rival consolidators will use the situation to their advantage when competing for acquisition targets but GRP insists pipeline is strong.
Having its agency with Aviva cancelled may make it more difficult for Global Risk Partners (GRP) to make acquisitions, according to market experts.
One insurance sector specialist who declined to be named said the move was “certainly bad news” for GRP and noted that it sent a negative message to the market in general.
He observed: “Aviva is a big brand. You don’t want to have to tell your clients that they have to move from Aviva or they won’t insure you anymore.”
The expert also believed that the other consolidators would see the news as an opportunity, noting: “It’s a competitive market so everything that gives the other consolidators an advantage will be of benefit to them.”
Insurance Age revealed that Aviva had ended its relationship with the consolidator last week, just a few weeks after it split with GRP-owned Alan & Thomas.
The provider also previously cancelled its agency with GRP-owned Marshall Wooldridge in May 2017.
Concerning
Meanwhile, one anonymous independent broker said that because of Aviva’s size most brokers would be doing business with the insurer and they would also take this into consideration when talking to potential buyers.
“Every other broker will now have an exclusive quote from Aviva against GRP,” he continued. “I would find it concerning if I was in that position.”
However, Bennett Christmas Insurance Brokers chief executive officer Mark Bennett did not think insurer relationships were the only factor that could impact on GRP’s pipeline of potential acquisitions.
“If a selling broker is exiting and doesn’t care about the relationships in place this doesn’t make a difference,” he said.
But he also stressed that Aviva was one of Bennett Christmas’s major partners and added:“If like for us the relationship is important in the long-term it would be a problem.”
Bennett explained that moving books of business from one insurer to another was not overly complicated and noted that Aviva’s footprint made it easier as “other insurers will be happy to take over”.
Commenting on the provider’s decision to end its relationship with GRP, he continued: “Aviva has taken a stance and I admire them for that. They haven’t deviated even though they could have and I’m encouraged by that.”
Consolidators
GRP has made a number of buys in the past year and broking CEO Mike Bruce has previously talked about its strategy to build hubs and make bolt-on acquisitions.
A broker from a rival consolidator said he did not expect the situation with Aviva to stop GRP from making acquisitions altogether, but he believed it would “make a few people nervous”.
“If selling to GRP means losing your Aviva agency that will make it more difficult for GRP to have those conversations because they will need to make sure that the broker won’t lose money,” the same expert added.
He also pointed out that there was a lot of competition between consolidators in regards to acquisition targets and confirmed the rest of them would be using this to their advantage.
“Each consolidator will use this to try and persuade the selling broker that they are the better offer,” the broker continued.
Adding: “It makes it easier for us to compete because we can say ‘but you wouldn’t want to lose your Aviva agency’. It will be used and I’m sure it will have some impact on future deals.”
Investment
Several experts believed the fall out with Aviva was a sign that GRP’s model when it came to commission rates was “too aggressive”.
In addition a source from a private equity firm questioned GRP’s model.
He stated that one of the things he looked for in a potential investment within the broking industry was the strength and nature of a firm’s relationships with insurers.
When asked whether his business would be reluctant to invest in a broker that did not have an agency with Aviva, he stated: “We’d look at which direction the business is going in and in this case I’d probably take the negative view.”
GRP
Mike Bruce, CEO broking at GRP said: “While we cannot comment on specific cases, I can confirm that appetite for the GRP business model is as strong as ever, among all our stakeholders, including a number of insurers with whom we have strategic partnerships.
“Our experience is that, when agencies have been withdrawn previously, the outcome for our regional broking hubs has been positive.
“Clients have been happy with new arrangements and these businesses have delivered substantial growth.”
Bruce concluded: “I can also confirm that our acquisition pipeline is as strong as ever.”
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