Challenging environment boosts offshore placement: AUB

Brokers are working harder than ever to assist clients operating within a challenging environment, with significant rate rises and other cost pressures, and are more often looking at offshore placements, AUB MD Mike Emmett says.

Increasing insurer risk aversion has also meant that the placing of certain risk categories is becoming more complex, Mr Emmett told the annual results briefing yesterday.

“Whilst we understand and sympathise with the challenge faced by insurers in the light of the significant increases in frequency and severity of climate-related losses our priority remains to assist our clients,” Mr Emmett said.

“We are therefore seeing an unprecedented rise in the need to place risks on behalf of our clients in the international market.”

AUB in May announced it planned to acquire London-based Lloyd’s brokers Tysers, which writes annual gross written premium of $3.6 billion, expanding its ability to assist medium to large clients and widening the range of products it will be able to offer.

Mr Emmett says the advantages of the deal are likely to be increasingly significant given longer-term trends affecting the market and issues in areas including property.

“A large part of our portfolio is actually property and casualty related risks and our view is that risks that correlate or are linked to climate change-related events are going to get worse rather than better, and as a consequence that they are going to get more expensive rather than cheaper,” he said yesterday.

AUB’s major Australian broking business reported a 7.6% increase in underlying revenue last financial year to $457.2 million, while underlying earnings before interest and tax rose 16.2% to $154.2 million.

Renewing rates, where there’s the same client risk and insurer, averaged an increase of about 9% last financial year.

Australian Broking made a number of acquisitions during the year including Vaughan & Monaghan and a number of equity step-ups in existing businesses, while also continuing to optimise the network through consolidation to create scale.

The company’s outlook assumptions for earnings growth in the current year include continued strong premium rate rises for Australia and moderate but accelerating rate rises in New Zealand.