Back in the old days, I was an anything-and-everything odd-job man working in the London office of the largest broker in Spain.

We participated fully in our parent’s profit-and-loss and had a remit simply to provide the best possible quality of service to our customers. No risk was too big or too small; if we were asked to do something, we did it, and we didn’t ask questions about minimum brokerage.

If someone wanted a rain cover for a tiny fiesta in Southern Spain, worth two rows of beans and a chorizo, we were quoting — no matter how much it ended up costing us to service the business.
The customer was always right (and, of course, if you dug deep enough, he was usually the 2nd cousin of the risk manager for Iberdrola, or Cepsa, or the Banco Santander!)

We did have a few decent big liability, professional indemnity, personal accident and bankers’ blanket bond accounts, and always made money somehow. But strangely enough, by our customers, we almost never meant the Spanish insurance companies that we purported to serve.

Our true fac client (and often own worst enemy) was almost always our retail arm. We were the kings of the ‘Reinsured TBA’ slip — after all, the well-run local markets that could quote (and whose treaties we salivated over) were usually in competition with us. Our fac ‘clients’ tended to be smaller outfits keen to semi-front deals for us.

They would retain an amount that appeared respectable (and hopefully avoided anything too punitive on the claims-control front), and took a healthy 7.5% ceding commission into the bargain.

We would do the rest. Okay, we stitched them up good and proper — but then it was our original business, not theirs. For instance, if someone in Seville had an inkling that a piece of business would be quoted in London, he didn’t waste his time with the locals, who would only go and put 10 different competing reinsurance brokers in the market to muddy the waters — he sent it straight in to us, probably via Madrid or Barcelona.

The ultimate client got the same price and no time was wasted — naturally, we also handled claims quicker and better this way, as we got the info right from the horse’s mouth.

Nowadays when I hear that this ‘tying’ of business is largely frowned upon, if not prohibited altogether, a small part of me wonders that, provided we have the right controls in place, we won’t go back to working in this way again at some point in the future?

I know we need to know our customer and avoid conflicts of interest, but after all, what’s wrong with a bit of joined-up thinking every now and again?