NASCO KARAOGLAN GROUP
THE ROLE OF THE INSURANCE &
REINSURANCE BROKER IN THE MENA REGION
By: DR KHALIL TALEB
CONTENTS
1. Introduction
2. Configuration
3. The Broker’s Role
4. His Duties
5. Diagnosis of Risk/Insurance Requirements
6. Risk Analysis
7. Risk Management
8. Services to the Client
9. Security Issues
10.Benefits of Appointing a Broker
11.Conclusion
CONFIGURATION
BROKER
DIRECT INSURED
DIRECT BROKER/CONSULTANT
•Person
•Property
•Liability
REINSURED/INSURER
REINSURANCE BROKER
•Insurance Company
•Reinsurance Company
•Broking Firm
Function is identical but its application varies
He works for the Client but is generally remunerated
By the Underwriters and/or Reinsurers
THE BROKER’S ROLE
HE IS
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To
To
To
To
To
To
To
To
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be versed technically
be a Mediator
be a Moderator
be a Catalyst
be Assessor of Information
Filter the information
be a Translator of culture
be aware of :
Client's need
Client’s requirements
The prevailing environment be it, Market, Political, Economic or Social Issues
The forces prevailing in the market
BUT HE IS NOT
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A simple intermediary
A post office
A Silent Partner
HIS DUTIES
1. Ensuring that all information about the risk received are well presented to
the Underwriters/Reinsurers Concerned
2. Ensuring that the Client disclose all material facts in appropriate form to the
Underwriters
3. Possessing a flexibility to adapt to his Client’s needs & requirements in a
particular geographical zone
4. Possessing the ability to deliver a Tailor made product (service)
5. Having global connections to follow on Client’s geographical expansion
6. Ensuring a close relationship with underwriters
7. Containing the blame
DIAGNOSIS OF RISK / INSURANCE
REQUIREMENTS
• Assessing the insurable interest (be it Property, Person or Liability)
such as “the property in the course of construction” for C.A.R or
“The Ship” for a Hull Policy and appropriation to the Owner of such
property
• Assessing the risk to be insured and providing the right conditions to
be given to the risk (Property to be insured/concerned). For
example, Institute Yacht Clauses not appropriate for an ocean going
vessel or Institute Time Clauses not suitable for pleasure boat etc.
• Ensuring the right coverages given after handing over of a project
such as decennial liability in a C.A.R policy &/or such protection as
business interruption following a delivery of a vessel or the like…
• Providing affiliated coverages that need to be looked upon such as
workmen compensation, crew personal accident, etc…
DIAGNOSIS OF RISK / INSURANCE
REQUIREMENTS
•
Designing Treaty Reinsurance Program according to each
Country’s specific need and local regulations.
1. Natural Perils/Earthquake/Flood Exposure
2. Unlimited Motor Liabilities
3. Medical/Labor Law
RISK ANALYSIS
THE BROKER
1.
Should have the technical ability and knowledge of the risk to advise the
Client of the possible/probable damage as to number and size of claim(s)
in order to work out the level of self-insurance (through deductible
bearing or otherwise) with a view to minimizing the cost of insurance.
2.
Should have the technical ability and knowledge to determine the most
appropriate method of risk financing and to assist the Client to assess the
optimum of risk assumption and risk transfer.
3.
Should have the ability to discuss technical matters with risk managers
&/or surveyors &/or risk assessors in order to provide the Client with the
appropriate technical advices with a view to bettering the risk and
allowing a saving on the cost of insurance.
4.
Should have the ability to assist the insurance companies to design their
Treaty Reinsurance programs in determining the risk profiles / statistics /
the max aggregate exposure
RISK MANAGEMENT
Following risks analysis, a risk management would be needed. It is aimed
at containing the risk of loss.
Risk Management comprises 3 phases :
1.
Identifying the risks which are likely to affect a property, such as natural
hazards, bad management or negligence
2.
Assessing the risk, such as evaluation and quantification of the possible
amount of a claim (both severity and frequency) and the likelihood of a
particular happening.
3.
Controlling the risk, as to the extent of, measures or precautions taken to
eliminate (loss prevention) or minimizing the overall cost of a claim.
SERVICES TO THE CLIENT
1.
Negotiating competitive/realistic pricing
2.
Ensuring competition among the various underwriters in the market
3.
Providing broadest coverage available which suits the Client’s insurance
needs
4.
Insuring favourable relationship with insurance markets
5.
Assessing accurate budget forecasting
6.
Screening financial capacity of insurance markets
7.
Ensuring swift loss recoveries
8.
Assuring market intelligence
9.
Forecasting environmental changes
10. Developing wordings appropriate to Client’s needs
11. Being proactive in claims handling
SECURITY ISSUES
It is the duty of the Brokers to ensure that all Companies with whom they
place insurance are financially sound and factually satisfy the Broker’s
responsibility to their Clients. An assessment of the underwriters should
take into consideration the following criteria :
1.
Financial Aspects
2.
Domiciliation
3.
Ultimate Ownership
4.
Reinsurance Protections
5.
Management
6.
Whether Long Tail and Us Business are heavily written
7.
Government supervision & regulations
8.
Currency Regulation
9.
Past Performance
BENEFITS OF APPOINTING A BROKER
1- FINANCIAL
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Independent advice without extra cost
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Reduction in premium through competition
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Reduction in administrative expenses
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Bargaining Power
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Choice in Insurance and Reinsurance Securities
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Management of premium payments / claims collection
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Analysis of scope of coverage at no extra cost
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Provision of packaging deals
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Free legal advice where needed
BENEFITS OF APPOINTING A BROKER
2.
OPERATIONAL
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Quality presentation of information to underwriters (slip)
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Flexibility in the choice of Insurance / Reinsurance terms
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Experience in answering questions to underwriters without bothering the
Client, whenever possible
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Technical support to local insurers
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Continuity with the International Markets
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Expert advice on the implications of contractual needs, legal matters and
associated insurance requirements
BENEFITS OF APPOINTING A BROKER
3. CLAIMS
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Recommendations of loss Adjusters according to the peculiarity of
the claim and territory
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Expert negotiations with the parties concerned in the interest of
all
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Control of collection from the Reinsurers/Insurers with minimum
delays
•
Control of currency fluctuation in claims settlement
CONCLUSION
The Broker forms an integral part of the
Insurance Industry and its promotion will do
nothing but boost its development.