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Risk managers warned on shallower underwriting pool for mergers

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NEW YORK — Merger and acquisition activity among underwriters is an “emerging risk” for risk managers.

Debbie Rodgers, senior vice president-global risk management at Aramark Corp. in Philadelphia, said that underwriter solvency used to be a key concern for risk managers. Now, risk managers are concerned that the sheer volume of M&A activity means that the pool of companies from which to buy coverage is shrinking.

Ms. Rodgers made her comments as she moderated a panel considering the effect of industry consolidation on the spread of risk at Business Insurance's seventh annual Risk Management Summit in New York on Tuesday.

Marti Dickman, vice president-risk management at Advanced Disposal Waste Holdings Corp. in Pointe Vedra, Florida, said the continued consolidation has resulted in limited capacity and a change in terms and conditions. “We're very concerned about it,” she said.

She said that during the transition period of a merger, insurers aren't as responsive to clients. “I'm uncomfortable with it,” said Ms. Dickman.

Another panelist expressed concern about consolidation's effect on innovation. “Without competition, you don't have innovation,” said Jack Hampton, a professor of business at St. Peter's University in Jersey City, New Jersey. He noted that in the early 1990s, a wave of downsizing washed across the insurance industry. It took “a big piece” out of the underwriting talent, but commercial insurance underwriting cannot be mechanized, he said.

There's an “enormous amount of activity in broker mergers and acquisitions,” said the third panelist, Timothy J. Cunningham, a partner with Optis Partners L.L.C. in Chicago. Much of that said that private equity backed brokers, he said. But he said there isn't a lot of private equity interest on the underwriting side of the insurance business.