Outlook: Sedgwick falls in the end game
Wednesday 26 August 1998
The way things are going, it can only be a matter of time before the clearing banks follow suit. Sedgwick and Willis Corroon, both UK-listed companies, were third and fourth in the global market. You might have thought that would be enough to sustain them as independents, but oh no. If other industries are consolidating, insurance brokers must too.
There's quite a history to this end game. As the insurance market has sagged over the last few years, Sedgwick's chairman, Sax Riley, has been seeking a tie-up with Willis Corroon to create a giant British broker capable of standing on its own. Unfortunately, his opposite number, John Reeve, refused to play ball. He was just determined to run his own show. Eventually he persuaded Kohlberg Kravis Roberts to buy him out.
Why should a client - or for that matter a colleague or a customer - care about a broker's nationality? Ian Smith, the chairman of Marsh & McLennan, says it is out of date to tag a company to the location of its headquarters. Sedgwick's business mostly involves consulting, selling and broking commercial insurance for multinational clients; it is a global business, and ownership doesn't matter.
Fair enough, but that's not what Sedgwick used to say. Up until quite recently it consistently argued that the interests of customers were best served by having more brokers, not fewer. Right now there are only four global brokers of any size left - Marsh & McLennan, its US rival Aon, Sedgwick and the now American-owned Willis Corroon.
Big commercial customers already have precious little chance to reject a broker on grounds of price or service. With three companies rather than four, the position is unlikely to improve.
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