FCA examines wholesale insurance brokers

The Financial Conduct Authority has announced an investigation into competition between wholesale insurance brokers.

The study will examine whether the sector encourages innovation and competition that benefits its clients. The London insurance market is one of the biggest for large specialist risks and is worth more than £68bn in gross written premium.

Brokers in the London market act as middle-men between clients seeking to protect themselves and underwriters, including in the Lloyd's market.

Insurers have complained that it costs too much to do business in London.

The regulator said the market has changed significantly in recent years. It wants to check whether new services and business practices offer good value to customers seeking to insure against catastrophes and other risks. Brokers often charge insurers high prices for risks bundled together instead of placing them in the market.

Christopher Woolard, the FCA's executive director of strategy and competition, said: “Given the size of the wholesale insurance sector and the type of large scale risks it covers, the way it functions can have a wide-ranging impact on the broader economy.

“If businesses cannot get appropriate cover or pay more for services than they should, it can impact on their ability to operate and grow.

“Brokers play an important part in the wholesale insurance sector ensuring clients get appropriate coverage at good value. However, following significant changes in the sector, we are looking at the dynamics to ensure competition is working well.”

The FCA said it would set out its interim findings towards the end of 2018.