The inquiry into broker remuneration by New York attorney general Eliot Spitzer has sent ripples of unease - and in some cases outrage - through the European risk management community, intensifying demands for much greater transparency. The Federation of European Risk Management Associations (FERMA) reports that many national risk management associations have already begun, or are considering, some form of inquiry or action, as details of contingent commissions, market service agreements (MSAs) and even price collusion between brokers and insurers have emerged from the Spitzer inquiry.
While few risk managers will have been unaware of the existence of MSAs between brokers and insurers, it appears that many had not appreciated the size of the payments involved. In addition, the allegations in the US of price rigging are clearly a cause for concern. However, none of those surveyed by FERMA indicated any evidence of this in Europe. And the recent Freshfields' review of the UK business of Marsh, voluntarily commissioned by the broker, found 'no evidence of bid-rigging or the submission of false quotes in connection with the placement of insurance business in the UK'. Nor did it find any evidence that a particular client paid more for insurance, or was insured on less favourable terms or with weaker security or service as a consequence of the influence of an MSA.
With the large firms of brokers now committed to relinquishing MSAs, the question remains as to what will take their place.
