Recent news articles have detailed the many woes of the insurance industry, specifically related to hidden fee arrangements coordinated by the largest global insurance brokerage firms. Although the news is disturbing and will only deteriorate the implicit trust between corporate clients and their respective insurance professionals, we believe the model for procuring insurance will, as a result, evolve to an approach Risk Capital Partners (RCP) has embraced from its inception.

As a boutique consultancy/brokerage RCP has never participated in the bid rigging arrangements exposed in the news, but instead worked for clients on an upfront consulting fee arrangement plus a modest commission earned when a policy is successfully placed. RCP has operated in this fashion since its inception, firmly believing it to be mutually beneficial for both client and RCP when undertaking the complex task of placing unconventional and difficult risks.

RCP believes that many of the tasks traditional brokers perform today will ultimately be converted into an in-house corporate function – with direct placements made between insurance carriers and corporate clients. However, for addressing unconventional risks, firms like RCP will play an increasingly important role and be recognized as a superior alternative to the traditional insurance broker.

There are four essential steps required to secure insurance for unique/unconventional risks:

1. Frame a sound (yet unconventional) proposition as to why the risk can be insured;
2. Define and structure the optimal risk mitigation vehicle;
3. Educate the insurance market on the merits of the risk in a language that underwriters/actuaries are comfortable with;
4. Intelligently determine the optimal pricing for the risk while maintaining the economic value in transferring said risk.

There are also crucial human elements: a credible team of experienced insurance professionals who began their respective careers as insurance carrier executives, actuaries and underwriters. Equally important is a success-driven culture: an entrepreneurial team that can build the necessary actuarial models, write a compelling pitch book, and prepare a draft manuscripted policy – in language that will not only educate insurance markets, but encourage them to take on the risk.

Over the past few months, major corporate clients have increasingly sought the expertise and resources of the RCP team… after bad experience with larger global brokers. Although RCP views recent news as a terrible setback for the insurance industry, we welcome the opportunity to place unconventional risks and restore corporate client trust in the insurance industry we represent.


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