SLE executives include (left to right) Ian Collie, senior underwriter; Richard Higgs, personal accident underwriter; and Mike Stevenson, underwriting manager.
Spass ... burla ... divertimento ... plaisir: In any language, fun is fun--and insuring fun in Europe, from amusement parks to motor sports, is serious business for SLE Worldwide, Ltd., a sister company of SLE Worldwide, Inc., and a subsidiary of Aon Corporation. Already well established in the United Kingdom and Ireland, SLE has set its sights on the rich and diverse markets of the European continent and has sought to establish a regional broker network on the Continent for sports, leisure, and entertainment business. We'll talk with Roger Bickmore, managing director, Mike Stevenson, underwriting manager, and Mike Patchett, sales and marketing director of SLE in London. We'll also speak with David Hatlem, who recently returned to SLE Worldwide, Inc., in Fort Wayne, Indiana, after three years in the London office as a senior director.
To a considerable extent, SLE's task involved breaking the traditional mold of monoline underwriting and creating a complete multiline package for SLE risks throughout Europe. "SLE had to develop business outside of the London market because that market is driven primarily by wholesale brokers," David Hatlem explains. "Two or three brokers typically see a given piece of business before it gets to the underwriter. While regional brokers could be serviced satisfactorily from a London base, the only way SLE could do business successfully on the Continent, without using a wholesale network, was to get local representation. Risk managers in any territory feel more comfortable buying from a local source with policies in their own language, so a large part of SLE's work was to expand its market presence outside of London and develop direct sources of business on the Continent."
Building local relationships
How is SLE organized to accomplish its mission? "The SLE office in London was opened in January 1995," Mike Patchett explains. "Four principal classes of business were being underwritten: property, liability, personal accident, and contingency. At that time over 90% of our business was being written in the London marketplace. In order to expand regionally, our initial approach was to establish ties with British regional brokers outside London--for example, in Manchester, Birmingham, and Glasgow. We concentrated on developing that business, and we created a structure within the company specifically to work with those regional brokers."
Building on that successful model, SLE next turned to the Continent, targeting Spain and Italy. "We began with Spain. Because of relationships we had developed over the years, we had contacts who strongly supported SLE's philosophy and who had sufficient experience for us to bring them on board," Patchett explains. "In February 1998 we opened SLE España, a branch office of our UK-based operation in Madrid. Its primary focus was developing relationships with new brokers, marketing, and distribution. That proved successful, so we chose next to concentrate on Italy because of the natural affinity with the sports and entertainment markets. Our Milan office opened in February 1999.
"The advantage is that we have people representing us locally who have identified good brokers--people we can trust to provide us with the information necessary from an underwriting perspective," Patchett continues. "The brokers create opportunities for us to develop business locally and also can assist us with claims as required." SLE operates as an underwriting agency with full binding authority on behalf of a select panel of Lloyd's syndicates, performing the underwriting, marketing, policy issuance, claims, and administrative responsibilities. "We've been underwriting on behalf of Lloyd's since 1998, and that gives us tremendous global flexibility," Patchett remarks. The Lloyd's syndicates are the exclusive markets for all of SLE's risks.
Expanding the network
With its Spanish and Italian outposts up and running, SLE will expand its reach into France and Germany. "Both of these markets are much harder to break into," comments Roger Bickmore, managing director of SLE. "In part this is because of regulatory constraints, and also because of long-held customs. Both Germany and France have abundant markets, with large insurers that entertain a variety of risks, so the niche specialist mentality isn't predominant. The idea is starting to evolve, though, as countries are increasingly opening their doors to competitive forces. In Germany, for example, most business used to be written on a direct basis, so each insurer had captive agents and didn't work through intermediaries. Over the last 10 years the trend has changed, and now brokers are much more involved in the market. That presents us with a tremendous opportunity."
Selling the "one-stop shop"
In addition to demonstrating the advantages of writing business through an underwriting agency, SLE also had to convince Continental retail brokers of the benefits of working with a niche specialist that offers a package of coverages. Mike Stevenson observes: "In London, the emphasis is very much on expertise in a single class of business. If you're a liability underwriter, you've often never handled any other kind of risk. Underwriters are focused on their particular areas, and the market traditionally has placed a premium on that kind of expertise. The first challenge was to establish us as a one-stop shop that writes four unique, but related, classes of business. We offer added value to both the broker and the client by enabling them to place all their business with one market instead of going to a different source for each kind of coverage."
The SLE "advantage"
How does SLE seek to position itself in the market? Stevenson responds: "First, we seek to establish a partnership between ourselves and our carriers. Second, we're highly selective in the risks we accept; we walk away from business that doesn't make good underwriting sense for either the short- or long-term. We've also introduced loss control at a sophisticated level; that differentiates us from the rest of the market. Our competitors lack that expertise. Loss control is a key focus, particularly in the motor sport and amusement park arenas, and that has strengthened our position immeasurably."
Meeting market challenges
Of the diverse range of risks for which SLE arranges coverage, what are some of the most difficult and challenging? "On the sports side, perhaps the most significant feature is the rapid rise in the amount of money involved," Stevenson remarks. "Contracts and transfer fees in the major sports, particularly soccer, have accelerated enormously in recent years. Many argue that this increases the likelihood of legal action should a player be injured in a reckless or negligent tackle, and of course the potential awards are increasing in line with earning power. Increased sponsorship and endorsement deals have led to a rapidly expanding contractual bonus market, and clubs are also seeking to protect themselves against loss of income arising out of regulation to lower leagues or failure to qualify for international competitions. The exposures are undoubtedly growing, and this increases the opportunities for specialist markets such as SLE."
Litigation trends
Over the last 30 years, U.S. courts have been forced to deal with a surging tide of personal injury lawsuits that have threatened to engulf the country's legal system. With the "victim mentality" securely in place, increases in both the number of suits and the amounts sought in damages have had a profound impact on insurance rates. For purposes of comparison, we asked Mike Stevenson to describe the legal climate in SLE's areas of operation.
"It's interesting," he replies; "as you head across the Atlantic, the first country you encounter is Ireland. It's quite a small country, but with respect to its legal environment there are comparisons to the United States in terms of losses, litigation, judgments, and so forth. Ireland has always been more litigious than the United Kingdom. Over the last few years, however, the litigation mindset has really taken off in the UK as well. Personal injury lawyers are now permitted to advertise on television and in other media. Settlements have not yet reached the extreme amounts that are common in the United States," Stevenson observes, "but the frequency of suits is on the rise. It's only a matter of time before award amounts start to escalate as well.
"In the rest of Europe, there is a completely different approach," he continues. "In Spain and Italy there are very few personal injury lawsuits, because injuries sustained at sporting events tend not to be viewed as being the fault of someone else. Unless negligence is clearly the cause, people seldom file suit."
Regulatory environment
In many overseas countries, strong regulatory barriers traditionally have inhibited the transaction of business by foreign insurers. How does SLE view the current regulatory situation in the countries where it does business?
"The big advantage we have in Europe is that there's only one regulatory body in each country--not 50, as in the United States," Roger Bickmore points out. "We don't have to follow 50 different sets of guidelines, so that gives us more flexibility. Also, by working with Lloyd's, we don't have to go through the process of filing rates." As an underwriting agency, Bickmore notes, SLE doesn't confront the regulatory obstacles that foreign insurance companies face. "In Italy and Spain, it's been relatively easy for us to enter the markets and operate as we do," he says. "For us, being an underwriting agency is the ideal situation."
Focus and flexibility
"The opportunities for SLE in Europe are fantastic," Bickmore concludes. "The sports and leisure sector is growing at a very significant rate across all the countries. The marketplace is more positive for insurers than it has been for several years. The appeal to our customers and their brokers of SLE's niche underwriting approach contrasts favorably with the larger insurers with which we compete. The foundations are in place for us to build as strong a base on this side of the Atlantic as our sister company has in the United States." *
SLE Worldwide, Ltd.
34 Lime Street
London EC3M 7AT
Phone: 011 44 (0) 207 220 0000
Fax: 011 44 (0) 207 220 0004
E-mail: zoe_kay@sleworldwide.com
Web site: www.sleworldwide.com