Risk manager Dave Hennes recalls three times when the broker on his account moved to another brokerage and asked the account to follow. Despite a business relationship that bordered on friendship, each time he declined the offer.

Mr. Hennes is not alone in coping with the nuances of the risk manager-broker relationship.

The brokerage industry's consolidation has put many risk managers in the same prickly position. Even with noncompete agreements, brokers who change employers maintain strong links to the risk managers they formerly serviced, given the personal nature of advice and service.

“The toughest part is telling someone you've grown to like, "No, I'm sticking with your firm, not you,'” said Mr. Hennes, director of risk management at Bloomington, Minn.-based Toro Co., with $1.52 billion in 2009 revenue.

Carmelo Casella has confronted similar dilemmas during 30 years as a risk manager.

“I had a situation once where the broker moved up at the firm and a new person was put on the account,” said Mr. Casella, managing director of corporate insurance at Bank of New York Mellon Co., a New York-based asset management and securities services company. “I was worried we wouldn't hit it off. If we'd had a personality conflict but the service was fine, I can work with that; but if we butted heads and the service was lousy, I'd be sending out (requests for proposals).” Fortunately, he and the new broker hit it off.

Like a marriage, the risk manager-broker relationship requires mutual respect, honest communication, realistic expectations and hard work. But what if risks emerge that the broker is ill prepared to address? Marriage is fine, but business is business.

“While a close working relationship with a broker is critical, the risk manager is representing his or her organization and the broker is doing likewise,” said Janice Ochenkowski, managing director, global risk management, at Jones Lang LaSalle, a Chicago-based real estate firm, and a past president of the Risk & Insurance Management Society Inc. “We may work closely with them, but they're not part of our company. A risk manager must maintain a professional distance to handle the difficult issues when they arise. You do develop friendships, but you must always make sure the needs of your company are the primary focus of discussions.”

The second time his broker changed employers, Mr. Hennes said he was “in the middle of a tough renewal season and my reaction was, "Of course I'll move the business because this person knows us inside out,'” he said. “But then the existing broker sent out a new team and assured me they'd give us the highest priority. I stuck with them and, in hindsight, I'm glad I did. They stepped their service up a notch.”

What if a risk manager wants a different broker to handle part of the insurance program?

“I had a situation where a different broker came to me with a market for a particular risk that hadn't been identified by the incumbent broker,” Mr. Hennes said. “I gave him a shot. It was difficult to let our existing broker know we'd made the change, but it was the right thing for the company. Fortunately, these kinds of situations are rare.”

A more common scenario is selecting a broker after a merger or acquisition. When Bank of New York Co. acquired Mellon Financial Corp. for $16.5 billion in 2006, “I was with Bank of New York; we had one broker and Mellon had a different broker,” Mr. Casella said. “I decided to do a full RFP just to these two brokers to see which one came up best. There was no need to bring in a third or fourth broker since each company was happy with the relationship. Eventually we made the decision to give all the business to one broker—not that it was easy.”

When a broker change is warranted, Ms. Ochenkowski said the “best way to deliver bad news is quickly, simply and directly.”

“I've had to tell one broker that we were putting another broker on part of our program. I know this can be awkward, but I took time to prepare for that meeting, writing down key points I wanted to make so it didn't devolve into something personal. I prefaced the discussion by saying, "This will likely be the toughest meeting I will ever have with you.' Then, I explained that this was best for my firm and what I had to do,” she said.

Pete Fahrenthold, managing director of risk management at Houston-based Continental Airlines Inc., said an internal audit that “raised some questions about service and pricing” prompted a review two years ago of all brokerage business. “We stuck with everything but the surety broker. I had to tell the incumbent that there were problems with service. I did this carefully since when a broker moves on, your reputation as a client follows them,” he said.

In selecting a broker, Mr. Fahrenthold said risk managers should insist the individuals making the presentation be the ones who will be assigned to the account if the contract is awarded to that firm. “Often a broker will send in their "stars'—not that they're the ones you'll get,” he said.

Continental Airline's RFP to brokers asked them to describe their experience in providing services and insurance to accounts similar in size and nature to Continental's. It also requested they identify the offices that would service the account, the organization's size and capabilities, coverage the broker believes should be purchased and preferred insurers. Other features include the brokerage's compensation structure.

Wayne Salen, director of risk management at Labors Finders International, Inc., a Palm Beach Gardens, Fla., temporary staffing company, has put together an extensive matrix to help select brokers. “It's a grid with 16 principal functional areas on it like staff expertise, communications capabilities, coverage terms and conditions, loss control expertise and capabilities with regard to serving firms like ours. Each area is evaluated with a one-to-five score. It's what I use to judge each broker and make a decision,” he said.

While Mr. Salen provides the completed matrices to the company's CEO for input, other risk managers may involve senior leaders or at least inform them of the process.

At Toro, for example, Mr. Hennes said Chairman and CEO Michael J. Hoffman often pops into Mr. Hennes' office to inquire about the company's risk exposures and the brokers and carriers addressing them.

Some risk managers get help from risk management consultants, but Mr. Fahrenthold is among those who prefer to talk to peers to determine their satisfaction levels with current or past brokers.

Ms. Ochenkowski also turns to peers for advice and leverages the relationships she has made at RIMS conferences. “You'll go to sessions and meet brokerage executives who either specialize in a critical area of coverage for your company or have a specialty in your industry—sometimes both,” she said.

Her department evaluates its brokerage relationships each year, “well in advance of renewal season, when things can get very confusing and complicated,” she said. “We feel that our brokers do more than just transactions, which is why their evaluations should be off-cycle from the (insurance) renewals.”

“When you're looking at new brokers, they need to know your administrative issues,” Mr. Fahrenthold said. “There's a lot of transferring of files and getting new people up to speed. That's another reason why you don't want to toss out all the experience you've gained with the incumbent broker. It's hard to start fresh.”

Russ Banham is a veteran business journalist, author of 21 books and former insurance editor at the Journal of Commerce.