Willis Group Holdings P.L.C.'s plan to take a majority stake in Miller Insurance Services L.L.P. to set up a London-based specialty broker handling wholesale and Lloyd's of London business would take advantage of Willis' scale and Miller's client base.

Under the plan announced last week, Willis and Miller said they were in advanced discussions on a plan in which Willis would take an undisclosed majority interest in Miller, move certain Willis wholesale business to Miller, and move Miller treaty reinsurance and retail-oriented business to Willis.

Miller would continue to operate under its current name with its current staff, the brokerages said in a statement.

Market observers say Dublin-based Willis would benefit from Miller's position and relationships in the London wholesale specialty market, while Miller's reinsurance activities would gain from Willis' scale.

“There has been tremendous consolidation within the wholesale brokerage industry,” said Julie Herman, New York-based associate director of insurance rating at Standard & Poor's Corp.

“Specifically, wholesalers are feeling pressure to get that scale and global reach and there's been a lot of significant deals,” she said. “The biggest one that is most similar to the Willis-Miller proposed deal is JLT combining with Lloyd & Partners to expand its international reach.”

Under the plan announced in August, JLT Specialty Ltd. and Lloyd & Partners Ltd. merged to expand the U.S. specialty business of the unit of Jardine Lloyd Thompson Group P.L.C.

Miller's expertise in wholesale specialty coverage could help invigorate Willis' wholesale activities.

“That may be a segment within Willis that got lost in the mix and didn't get as much attention,” said James Auden, Chicago-based managing director of insurance at Fitch Ratings Inc.

“Perhaps that's part of the rationale to partner with somebody else who has that experience and is in that market - it's their lifeblood,” said Mr. Auden.

The question is whether Miller can grow the wholesale business and profit from the added scale by combining with Willis, he said.

“Miller's reinsurance business has been under enormous pressure,” said Meyer Shields, managing director at Keefe, Bruyette & Woods Inc. in Baltimore. “It's very hard to be a small reinsurance broker when the number of reinsurance dollars is declining pretty rapidly.”

“You do have client relationships worth preserving, but if you cannot attach those to one of the leading reinsurance brokers, it's just going to be increasingly hard to compete,” he said. “This is one of the areas of opportunity from this arrangement.”

“I think it plays to both companies' strengths,” said John L. Ward, CEO of Cincinnatus Partners L.L.C. in Loveland, Ohio. “Whatever reinsurance business Miller has would probably do much better under the Willis brand.”

The move is unlikely, however, to trigger any significant trend by major brokers to re-enter the U.S. wholesale specialty market en masse, analysts said.

Willis, along with Aon P.L.C. and Marsh L.L.C., sold their U.S. wholesale brokerage businesses in 2005 under a cloud as then-New York Attorney General Elliot Spitzer investigated industry practices.

“I don't think it signals that there will be a return of the big three to the U.S. wholesale market,” said Tim Cunningham, managing director at Chicago-based investment banking and consulting firm Optis Partners L.L.C. “There's been so much consolidation in that business if you don't have a lot of scale it's pretty hard to make it, and there would be very few acquisition opportunities with enough scale.”

Mr. Shields said he has asked Marsh and Aon “whether they're interested in purchasing what is an explicit domestic wholesale broker and so far they've said, "No.' I don't know that this will change their minds.”

“Anytime you have a major large player like Willis looking into a deal like this, I'm sure it is among the discussions at other companies,” said Ms. Herman. “Clearly, other companies have to look at what their peers and what the other players in the market are doing and evaluate how it changes things for themselves.”

“The big brokers have a lot of capital and you never know what move one of them is going to make,” said Mr. Ward. “It's well worth watching what the next move is.”