Marsh & McLennan's focus this year will be on building its small-commercial market insurance agency business--a niche the company's chief executive said should be highly profitable, but which he conceded the mega-brokerage failed miserably to effectively cultivate in the past.

"We have successfully screwed that up year after year," said Brian Duperreault, president and chief executive officer of New York-based MMC, elaborating last week on plans announced late in 2008 to develop a new unit within the company to handle small-commercial accounts--Marsh & McLennan Agencies.

Discussing the new initiative during a conference call with financial analysts at the Merrill Lynch Insurance Investor Conference, he called the move a logical step to grow business in the small-commercial market--one that he said would prove to be very lucrative for the firm.

However, he said prior attempts to write substantial business in the Main Street sector were unsuccessful because the firm "smothered it with 'Mother Marsh'"--the insurance brokerage subsidiary of MMC.

The vision for MMC Agencies, he said, is to create a hub-and-spoke type of network, growing the business "brick by brick" with the acquisition of small independent agencies.

While small agencies offer Marsh quick, efficient entry into the small-commercial market, the benefit for such firms to join MMC will be access to products they would normally have to market via wholesalers.

Mr. Duperreault said building the agency unit will take time but emphasized it is a strategically smart move because there are plenty of acquisition targets and the margins are high. He also indicated the brokerage has interests in making some international acquisitions to add to Marsh's footprint.

Commenting again on what he characterizes as an "invisible hard market," he explained that while premium increases are inevitable, insurers and brokers will not see the usual benefit of higher rates immediately because clients will likely be buying less coverage due to the economic crisis. He said the drop-off in insurable exposures will effectively neutralize any benefit of rate hikes for the industry.

However, he added that because of deteriorating earnings for insurers, it would not take a "big event" to promote sustained hardening in the market.

Reinsurance is already showing some signs of hardening--more so than in the retail insurance market, Mr. Duperreault observed. He said the company's reinsurance brokerage subsidiary--Guy Carpenter--has seen a turnaround in its business, with conditions continuing to improve. He also cited improved morale, leading to better performance.

Asked about how Aon's acquisition of the Benfield reinsurance brokerage is affecting his business, Mr. Duperreault said: "We feel very good about 2009, and when you lose a competitor, it makes you feel good."

Special Reports /

MMC To Focus On Small-Agency Buying

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