As an alternative to earning just commission for placing client insurance policies with the commercial insurance market, the use of a producer or broker owned insurance or reinsurance vehicle can allow brokers to participate in the underwriting profits usually retained solely by the insurer.
A broker, as a producer of business, can sponsor and establish their own (re)insurance company where a proportion, or even all, of their client risks can be insured. In certain circumstances the company can be used to insure on a direct basis or via quota share reinsurance arrangements with the existing insurer.
Protected Cell Companies (PCCs) can provide the optimal structure to insure or reinsure the risks of several different clients by underwriting their respective exposures into separate cells. These structures offer the following advantages to brokers:
- The potential to earn underwriting revenue in addition to commission
- Enhanced risk management control
- The ability to identify and therefore benefit from good quality business with a low claims ratio
- Provide a hedge against hardening market rates and reduced commissions
- Pricing and cover flexibility
- Access to reinsurance markets
- Enables the broker to provide an enhanced service to their clients which generates even more value from existing profitable business
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