The Commission´s sector inquiry into business insurance: outcome and next steps

Subscription markets are those whereby an ad hoc syndication arrangement is set up by a broker or client in order to cover a given risk. The process characterises direct insurance for large commercial risks as well as reinsurance (both treaty and facultative) (2). Typically, it involves a restricted number of specialist insurers being approached to quote terms and conditions and to act as ‘lead insurer’ on the contract (we call this the ‘lead market’). The lead insurer, which manages the contract and any claims associated with it, offers to cover a certain quota of the risk, and, once selected, its terms and conditions are then communicated to a selection of insurers which may include those approached in the first round as well as other specialist and generalist insurers. These are invited to take a share of the risk, usually on identical terms, including premium (we call this the ‘following market’). It is usually the case that the share and terms of the lead insurer are guaranteed once it is selected at the end of the first stage. In certain national markets, however, this may not apply. Other variations that characterise certain markets are the use of a ‘lead provision’ which remunerates the specific role of the lead insurer, and the fixing of broker commission levels for all participating insurers already at the lead stage.