Reinsurance brokerage Guy Carpenter & Company, the leadingglobal risk and reinsurance specialist, announced today it wasissuing recommendations on how to succeed in the insurance marketas prices decline.

The firm said it was publishing “Optimize in a Soft Market,Succeed in Any Market–Five Strategies for MGAs and MGUs,” abriefing paper for wholesalers, managing general agents andmanaging general underwriters.

Strategies in the publication, the firm said, would help itsreaders “maximize opportunities and position themselves for successin the current soft insurance market and beyond.”

The brokerage in a statement said the paper covers the followingpoints:

o Business analysis: MGAs and MGUs by re-examining the productsand services they offer, how they are distributed, theirvalue-added proposition and the carriers to whom they are marketed,can make better-informed decisions that will position their firmsto outperform when prices rise. The source and execution of agrowth plan can be enriched with a combination of introspection andthird-party counsel from trusted advisers.

o Operational assessment and enhancement: Streamliningprocessing and instituting new efficiency measures when profits aresqueezed can significantly bolster MGA and MGU profitability. Theseinitiatives can range from new technology systems to streamliningunderwriting, claim management and premium audit practices to lesscostly improvements in the areas of billing, collections andaccounting. Managed effectively, these operational enhancements canlead to improved cash flow and profitability.

o Business expansion and diversification: Expanding thebusiness, even in a soft market, can help increase revenues whileblocking out competition, especially from new market entrants.Developing new revenue sources by growing existing business lines,adding new lines and classes of business, finding new sources ofbusiness, or even a well-planned and timely acquisition caninsulate firms in a difficult operating environment and provide asubstantial platform for growth.

o Positioning and preparation: MGAs and MGUs should use thecurrent market to position themselves for rapid growth whenconditions become more favorable. By searching for and developingnew partners in new markets, firms can protect themselves throughrelationship diversification and benefit from greater alternativesin a hard market.

Likewise, the soft market represents an excellent opportunityfor companies to analyze data, both to find soft market expansionopportunities and to plot a trajectory for growth when the markethardens.

o Capitalization and investment: Investing in company growth ina soft market–either through self-financing or the use of outsidecapital–can have a profound impact on long-term competitiveadvantage, enabling the acquisition of new systems, distribution,companies and talent, and growing the business without puttingundue pressure on margins.

“Soft markets present a number of challenges for MGAs and MGUs,but they can also yield significant opportunities if firms focus onoptimizing operations for long-term sustainable growth, rather thanshort-term profits,” said Carl Bach, managing director and head ofGuy Carpenter's Program Manager Solutions Specialty Practice.

He added, “Rather than relaxing underwriting standards andchasing the business cycle, companies would be well served to usethe soft market to fine-tune the business for profitability andfuture returns, regardless of market conditions.”

Mr. Bach said rather than implement all five initiatives atonce, “it makes more sense to select only the few that are mostlikely to yield the largest return.”

The briefing is online at www.guycarp.com. The contact forprinted copies is Guy Carpenter at [email protected].