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The ripples from Eliot Spitzer's broadside against brokers were very evident when the Federation of European Risk Management Associations held its Forum in Lisbon, Portugal.

FERMA announced back in February 2005 that it was working with the European brokers' association to create a charter on remuneration that offered common guidelines across Europe for brokers, insurers and risk managers. FERMA had hoped to announce in Lisbon that the industry's leading players had signed up to it.

Maurizio Castelli, chairman of the International Federation of Risk and Insurance Management Associations, suggested that Europe was still far from achieving full transparency on the issue of broker remuneration. It was evident that the problem extended beyond the United States, and despite progress over the past year, much remained to be done.

Despite the lack of signatories to FERMA's proposed charter, the broking sector's representatives at the Forum were keen to stress that they had already addressed the transparency issue.

Richard Bucknall, vice chairman of Willis, contended that the broker's own "bill of client's rights" had been drawn up in late 2004, eschewed the continued use of contingency fees and exceeded the federation's requirements.

This failed to satisfy Maurizio Castelli, who acted as moderator for the roundtable session.

"FERMA and IFRIMA are seeking an industry wide endorsement, not seeking to replace an individual charter such as that issued by Willis," he retorted. "We still don't see a common position across the broking industry."

However, Marsh's president and chief executive for Europe and the Middle East, Bruce Carnegie Brown, suggested that as "associations tended to move at the pace of their slowest members," brokers that worked more swiftly and produced their own, independent response stood to gain from competitive advantage.

There was general agreement that the "fees versus commissions" argument was still being debated in many parts of Europe, with some brokers still reluctant to move to a fee basis.

"Commissions have lasted a long time because they're simple and easy to understand," commented Richard Bucknall. "We're equally relaxed with either and will even blend the two should the client request it."

Castelli suggested that the industry also continued to have an image problem from its role as intermediary. Many European risk managers still perceived this as acting as a barrier between the company and its underwriters.

"If the broker is regarded as a barrier or 'Chinese wall,' then we've failed," responded Bucknall. "We aim to do for clients what they can't do for themselves and fulfill this role only in areas where the client lacks either expertise or manpower."

The session also gave Gregory Case, Aon's new president and chief executive officer, an opportunity to set out his group's response to Spitzer. Case commented that brokers had to operate in "a transparent world".

"We must either add value to justify our price, or lower our price where we can't add value," he admitted. "Discussions over the past year have centered on compliance. But in the future, the focus must be on client value."

However, it was not mentioned that, on the same day, Aon U.K. announced plans to cut a further 750 jobs, or around 11 percent, from its workforce and to reduce its office network in Britain at a total cost of $54 million. The New York Attorney General's lawsuits had forced a reappraisal of the market, the group said.

December 1, 2005

Copyright 2005© LRP Publications