Underwriting agencies account for $1.6 billion in annual premium to the Australian insurance industry and are becoming a more significant part of the industry, says Underwriting Agencies Council Chairman Bob Lee.

Speaking at the Australia and New Zealand Institute of Insurance and Finance’s NSW Regional Conference at Coffs Harbour, he said underwriting agencies account for 8% of the commercial insurance market.

He says $320 million of the premium written by underwriters represents Lloyd’s of London security, with the rest going to domestic and international insurers.

“The outsourced business model is a proven, successful formula in most industries, and insurance is no exception,” Mr Lee said.

Consolidation among Australian insurers has fuelled growth in the agencies sector, with the market dropping from 170 general insurers in 1998 to 133 by the end of 2005. More consolidation is likely.

“With the top five insurers writing 80% of the business, that provides opportunities for niche, specialist players,” he said.