THE ROLE OF THE INSURANCE & REINSURANCE BROKER IN THE MENA REGION
By: DR KHALIL TALEB
CONTENTS
Introduction
Configuration
The Broker’s Role
His Duties
Diagnosis of Risk/Insurance Requirements
Risk Analysis
Risk Management
Services to the Client
Security Issues
Benefits of Appointing a Broker
Conclusion
CONFIGURATION
THE BROKER’S ROLE HE IS
To be versed technically
To be a Mediator
To be a Moderator
To be a Catalyst
To be Assessor of Information
To Filter the information
To be a Translator of culture
To be aware of :
1- Client's need
2- Client’s requirements
3- The prevailing environment be it, Market, Political, Economic or Social Issues
4- The forces prevailing in the market
BUT HE IS NOT
A simple intermediary
A post office
A Silent Partner
HIS DUTIES
Ensuring that all information about the risk received are well presented to the Underwriters/Reinsurers Concerned
Ensuring that the Client disclose all material facts in appropriate form to the Underwriters
Possessing a flexibility to adapt to his Client’s needs & requirements in a particular geographical zone
Possessing the ability to deliver a Tailor made product (service)
Having global connections to follow on Client’s geographical expansion
Ensuring a close relationship with underwriters
Containing the blame
DIAGNOSIS OF RISK / INSURANCE REQUIREMENTS
Assessing the insurable interest (be it Property, Person or Liability) such as “the property in the course of construction” for C.A.R or “The Ship” for a Hull Policy and appropriation to the Owner of such property
Assessing the risk to be insured and providing the right conditions to be given to the risk (Property to be insured/concerned). For example, Institute Yacht Clauses not appropriate for an ocean going vessel or Institute Time Clauses not suitable for pleasure boat etc.
Ensuring the right coverages given after handing over of a project such as decennial liability in a C.A.R policy &/or such protection as business interruption following a delivery of a vessel or the like…
Providing affiliated coverages that need to be looked upon such as workmen compensation, crew personal accident, etc…
DIAGNOSIS OF RISK / INSURANCE REQUIREMENTS
Designing Treaty Reinsurance Program according to each Country’s specific need and local regulations.
Natural Perils/Earthquake/Flood Exposure
Unlimited Motor Liabilities
Medical/Labor Law
RISK ANALYSIS
THE BROKER
Should have the technical ability and knowledge of the risk to advise the Client of the possible/probable damage as to number and size of claim(s) in order to work out the level of self-insurance (through deductible bearing or otherwise) with a view to minimizing the cost of insurance.
Should have the technical ability and knowledge to determine the most appropriate method of risk financing and to assist the Client to assess the optimum of risk assumption and risk transfer.
Should have the ability to discuss technical matters with risk managers &/or surveyors &/or risk assessors in order to provide the Client with the appropriate technical advices with a view to bettering the risk and allowing a saving on the cost of insurance.
Should have the ability to assist the insurance companies to design their Treaty Reinsurance programs in determining the risk profiles / statistics / the max aggregate exposure
RISK MANAGEMENT
Following risks analysis, a risk management would be needed. It is aimed at containing the risk of loss.
Risk Management comprises 3 phases :
Identifying the risks which are likely to affect a property, such as natural hazards, bad management or negligence
Assessing the risk, such as evaluation and quantification of the possible amount of a claim (both severity and frequency) and the likelihood of a particular happening.
Controlling the risk, as to the extent of, measures or precautions taken to eliminate (loss prevention) or minimizing the overall cost of a claim.
SERVICES TO THE CLIENT
Negotiating competitive/realistic pricing
Ensuring competition among the various underwriters in the market
Providing broadest coverage available which suits the Client’s insurance needs
Insuring favourable relationship with insurance markets
Assessing accurate budget forecasting
Screening financial capacity of insurance markets
Ensuring swift loss recoveries
Assuring market intelligence
Forecasting environmental changes
Developing wordings appropriate to Client’s needs
Being proactive in claims handling
SECURITY ISSUES
It is the duty of the Brokers to ensure that all Companies with whom they place insurance are financially sound and factually satisfy the Broker’s responsibility to their Clients. An assessment of the underwriters should take into consideration the following criteria :
Financial Aspects
Domiciliation
Ultimate Ownership
Reinsurance Protections
Management
Whether Long Tail and Us Business are heavily written
Government supervision & regulations
Currency Regulation
Past Performance
BENEFITS OF APPOINTING A BROKER
1- FINANCIAL
Independent advice without extra cost
Reduction in premium through competition
Reduction in administrative expenses
Bargaining Power
Choice in Insurance and Reinsurance Securities
Management of premium payments / claims collection
Analysis of scope of coverage at no extra cost
Provision of packaging deals
Free legal advice where needed
BENEFITS OF APPOINTING A BROKER
2. OPERATIONAL
Quality presentation of information to underwriters (slip)
Flexibility in the choice of Insurance / Reinsurance terms
Experience in answering questions to underwriters without bothering the Client, whenever possible
Technical support to local insurers
Continuity with the International Markets
Expert advice on the implications of contractual needs, legal matters and associated insurance requirements
BENEFITS OF APPOINTING A BROKER
3. CLAIMS
Recommendations of loss Adjusters according to the peculiarity of the claim and territory
Expert negotiations with the parties concerned in the interest of all
Control of collection from the Reinsurers/Insurers with minimum delays
Control of currency fluctuation in claims settlement
CONCLUSION
The Broker forms an integral part of the Insurance Industry and its promotion will do nothing but boost its development.
