Arthur J Gallagher sees opportunities to expand its underwriting agency business in Australia and may consider joint ventures announced by QBE last week.

“It is a fantastic market for underwriting agencies and where there is a quality business with quality individuals, we will absolutely be talking to them,” Underwriting and Distribution MD John Hastings-Bass told insuranceNEWS.com.au.

QBE has announced it will sell down its ownership in strata agency CHU and mobile plant specialist Underwriting Agencies of Australia. See other story.

Mr Hastings-Bass says an agency joint venture may be considered.

“There is not enough detail out there to give a definite answer,” he said. “We have a great relationship with QBE and we do a lot of business with it.”

UK-based Mr Hastings-Bass says agencies are an important distribution channel and there are good business opportunities, amid difficult market conditions, in the mid-tier sector where major underwriter offerings are more commoditised.

“Where we are really good is where our underwriters can apply their technical expertise to a difficult problem that a broker has on behalf of his client. That is where underwriting agencies are at their best, tailoring cover below that mega-risk line, in that mid-market.”

Gallagher has expanded its broking business in Australia and New Zealand with the purchase of Wesfarmers’ OAMPS and Crombie Lockwood divisions.

Mr Hastings-Bass says the agency and broking businesses have different obligations, with one focused on their duty to capital providers and the other to policyholders, and the need for separation is an increasing focus for UK regulators.

“The thing that differentiates Gallagher is we absolutely understand the fundamental need to separate underwriting from broking. I think you see a lot of broking groups run them much too closely together.”

He says growth opportunities for managing general agents are mostly in mature insurance markets, where there is a need for targeted specialist assistance.

“It is probably early days in Asia for a really good managing general agent market – it is quite small at the moment. We will see underwriting agencies grow and prosper in Asia, but my guess is not for a few years.”

Meanwhile, Gallagher has announced that all but a few of its global managing general agencies will adopt the Pen Underwriting brand.