New run-off firm sees opportunities across the Spectrum

As the soft markets bites and with the implementation of stiff regulation increasing, a number of brokers and particularly reinsurance brokers are looking to divest parts of their business.
It has prompted a group of insurance and broking specialists to launch a new firm to target reinsurance broker run-off and its managing director says the opportunities are there both now and in the future.
Spectrum Global Management Ltd was launched from its Jersey base last month and John Gamlin explains the market conditions point to a period of consolidation and reorganisation.
“The soft market conditions have impacted on the broker market and their revenue levels,” he adds. “I think the conditions are such that there will certainly be some consolidation of the market, both merger and acquisitions and with firms looking at how they structure their business going forwards.
“With rates falling broker revenues are under pressure and they are having to look at their cost bases and expenses. It is the type of conditions where firms within the insurance and reinsurance markets will examine their short medium and long terms strategies and as such will then look closely at their business classes and may look to take some tough decision on what is and is not core to their ongoing business models.”
This can often lead to the divestment or closure of all or part of a business or unit, and Mr Gamlin says it is then that the firms look to ensure the most cost effective and efficient solution to the problem.
“We have set ourselves up to provide a range of services to the reinsurance broker primarily,” he explains. “It is administration, run-off, commutations and other third party services.
“There are five of us in the team and three have had long experience in the insurance and reinsurance markets while two others are experienced administrators.”
He adds that the firm is looking to the wider market and will seek to win contracts for insurers and reinsures but at present the broker market has been where they have concentrated their efforts.
“We have won a contract in Malaysia and PWS has also contracted us to work on one of its units,” said Mr Gamlin. “It is a very interesting time in the market and the talk of the impending impact of Solvency II is also having an effect with insurers and risk carriers examining their capital needs and their ability to remain in the broad range of classes they in which currently participate.”
Mr Gamlin said London currently remained the area of most opportunity but there were other regions where the softening market was beginning to bite.
“London clearly given the diversity of its market is a major focus for us in the months ahead but we are also seeing a great deal happening in the Asian markets as the region’s brokers and insurers examine their strategies for the future in what is a region where there is some dynamic movement in a range of fast growing markets.”
He adds: “When a decision has been made to divest or run-off an area of your business then it simply comes down to cost.
“You have to look at how cost effectively you can dispose of the business while meeting the expectations of the clients and your shareholders.
“It is therefore vital for any firm which seeks to provide the services we are providing to have an internal operation and cost structure which ensure we can offer our solutions at a cost which can be justified by the directors and the boards of the client company.”
The firm is based in Jersey and has a representative office in Cheltenham.
“We believe there are opportunities in the administration and run-off sectors and that demand for the services of experts will only grow as the costs of regulation continue to add pressure on the smaller companies in the market,” Mr Gamlin adds.

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