This presents the brokers with a great opportunity of course. This is because if they can effectively meet these rising customer’s demands with cost-effective solutions they have a chance to significantly boost revenues and at the same time further increase the proportion of consulting fees earned as opposed to transaction-based fees that are vulnerable to the vagaries of the pricing cycle.

But, as most of the brokers who took part in the Risk Distribution survey acknowledged, this opportunity also carries with it a big risk. Many customers are frustrated that the global reach and spread of the biggest brokers is not necessarily matched by an ability to deliver consistent and sustainable solutions for them in a coherent way. And, some suggested, if the big brokers cannot do this then they will increasingly lose out to more niche and perhaps more easily managed smaller brokers that operate on a network basis with like-minded ‘independents’.

Gilbert Van den Eynde, Global Leader of Marsh’s G5 operation for multinational customers, has the job of making sure that the New York-based global broker can deliver that seamless service that the bigger corporate customers so desire. He explained his role and strategy to Commercial Risk Europe during the recent annual meeting of the DVS in Munich, Germany.

“Clients tell us they want us to take a global approach,” Mr Van den Eynde told CRE. “This takes a lot of resource to organise and manage but you have to have a sustainable service model for larger customers that provides them with the easiest access to the best resources, whatever the situation or by any means,” he explained.

“Delivering that is about consistency and raising service levels. By providing one face to the customer via the client executive, who is responsible for the delivery of that service, clients can access whatever service they need to meet their business risks,” he continued.

One thing that was made clear during the Risk Distribution survey was that risk managers with big organisations are not happy when brokers pull out the heavyweights to win their account and then leave the customers with juniors from then on.

The risk managers that we surveyed said that they want and need to see ongoing commitment from senior management to their cause to ensure that their wider risk management interests are looked after properly.

Mr Van den Eynde said that this is certainly the case at Marsh. He added that the recent appointment of Dan Glaser to the newly created position of group president and chief operating officer of Marsh & McLennan Companies plus the appointment of Peter Zaffino as CEO of Marsh, gives his operation a clear line and access to senior management.

Mr Glaser joined Marsh in December 2007 from AIG where he was head of AIG Europe to be chairman and chief executive officer of Marsh. In his new role, confirmed in April of this year, Mr Glaser was given operational and strategic oversight of Marsh & McLennan Companies’ Risk & Insurance and Consulting segments.

But, as the risk managers interviewed for both Risk Distribution and Risk Frontiers made very clear, top level commitment has to be supported by a consistent approach at the client manager or advocate level, as some term it.

Customers want to deal with experienced, knowledgeable and influential individuals on a day-to-day basis too. No risk managers with larger European corporations want to be used as a training ground for up and coming young brokers.

Again, Mr Van den Eynde said that Marsh is well aware of this desire and is on the case.

“Consistency and maturity are important and we work hard to ensure that there is a clear focus on our global clients. For this reason the individuals charged with looking after our major clients are regarded as highly knowledgeable and valued colleagues. These roles provide a strong career path. We have many very good people who do not want senior management roles but who can perform these crucial roles for our clients. We continually seek feedback from clients to ensure we have the right arrangements in place,” he explained.

The former risk manager for German pharmaceutical group Bayer said that it is important for brokers to keep close to their customers and understand how they can have a real impact within their organisations, particularly as the profession is changing at quite a rapid pace.

“One thing we discuss quite a lot with our customers is how they feel they can contribute value to their organisation and how they can have a stronger impact. The risk management family is a big one and there are big differences between companies on how well it is embedded in their organisations. There is something of a generation change occurring and the risk manager’s role is evolving over time both in Germany and in Europe as a whole. It used to be so much more focused on insurance and risk transfer but people are now much more involved in wider risk management,” he said.

“Here in Germany this is a challenge as companies become more and more global and the risk profile changes. Big companies are going to places like Brazil, India and China. This presents difficult challenges for risk and insurance managers and change can happen very quickly. Just consider the changes we have recently witnessed in North Africa. The global profile and approach of modern business means that the risk profile is changing fast,” continued Van den Eynde.

The broker said that in such fluid situations risk managers need to make choices. “With so many things happening at the same time in big companies risk managers need to create time to deal with it. No risk manager is going to get five to ten new people to help them deal with the new challenges so they are going to have to outsource and find the right partners, good partners. This is a challenge. Work is becoming more complicated, and we have legal and legislative changes from Europe such as environmental legislation on top of that. This all takes time and you can’t just deal with such things every few months. It has to be managed on an ongoing basis,” he said.

Some risk managers who took part in the Risk Frontiers survey said that they believed that the fast-changing risk profile of so many companies, combined with cost constraints, presents brokers with a big opportunity to offer that outsourced risk management support as long as they can offer a sensible, mature and skill-based service rather than a transaction-based approach.

Mr Van den Eynde agrees that there is a ‘huge’ opportunity but does not think that it is open to all brokers. Some have suggested that the niche brokers, for example, should benefit from the rising complexity of the risks faced by modern day risk managers as bigger brokers fail to keep up with specialist demands. Mr Van den Eynde disagrees with this theory.

“There are a lot of good niche brokers in Germany and other European countries but you have to ask how effective is this model for larger customers? Companies have to make choices. As a risk manager, if you work in many different territories you want and need a consistent approach and that is what Marsh aims to deliver. If you work with six different brokers you have six different workloads and have to manage all that information flow. It is not a black and white question but everyone wants to achieve efficiencies and make sure they achieve a sustainable service—that is what we deliver,” he said.

Mr Van den Eynde also said that access to the mass of information that a global group like Marsh can deliver for customers is also important in the global economy. Modern day risk managers need and want sophisticated analysis and benchmarks and he said that Marsh provides a lot of peer reviews for customers, for example. “We have a system behind this and we keep challenging our people to add to and build it. This is very valuable for customers,” he said.

“Access to such resources is vital. In a big organisation like ours questions that one customer asks have inevitably been asked before somewhere else in the world and we have to make sure that we can draw on that experience and knowledge to find solutions for customers. Again it is not rocket science but really a very strong part of what we do and a discipline to keep looking into the details, being open to the client and finding the right solutions by managing the resources we have well,” explained Mr Van den Eynde.

One area that some risk managers mentioned during the Risk Frontiers survey as a possible answer to some of their complex needs, particularly for emerging risks, is Alternative Risk Transfer (ART). Some believe that there is a chance for ART- type tools and structures to re-emerge following its apparent loss of popularity after questions were asked by regulators about their use and possible abuse in the late 1990s. Ideas about how to ensure that captives remain a useful risk management and transfer tool in the post-Solvency II world have helped sparked this debate.

Mr Van den Eynde said that ART had never really gone away, certainly has a place but needs to be used carefully. “It has always been in the minds of customers and a lot of good work has been done. But you have to ask whether it can be accepted as insurance and how local regulators are prepared to deal with it, from a taxation point of view and the like. These are not things that you can buy off-the-shelf. They have to be very specific and can take a lot of time to develop so there is always a hurdle there. Also customers have to always remember that such products are never the 100% answer, there will always be risk that needs to be managed and transferred to others,” he said.

The fact that there will always be risk that needs to be managed and transferred to others is clearly good news for the brokers and insurers of this world. Exactly how they manage to ensure that this demand continues to grow and can be serviced in a cost effective manner that satisfies both customers and investors is the big question.

Marsh has chosen the global route that provides it and its rivals with as many challenges as opportunities. Evidence from the Risk Frontiers and Risk Distribution survey strongly supports the idea that this current phase of the global economic cycle will sort out the winners from the losers in this increasingly high stakes game.

Mr Van den Eynde will increasingly find himself at the centre of this strategic challenge as it evolves. It is good news for Marsh that he is a former risk manager himself and so at least should have a good understanding of what the people want. Whether or not Marsh decides that this market is worth the long-term investment in a world of increasingly tight margins to enable it to deliver is up to them and should be readily apparent in a short space of time.

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