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WHAT IS A RISK MANAGER to make of the tide of broker mergers and acquisitions and the many rumors swirling through the market about deals to come?

Will it mean a new era of insurance and risk management superstores, offering a gigantic array of services with global reach, or an oligopoly, where a few huge companies control the market and buyers are stuck with nowhere else to turn?

We believe that while some buyers initially may find themselves between a rock and a hard place with fewer large brokerages to choose from and an insurance market eager not to antagonize the megabrokers, eventually the consolidation trend will result in more and varied choices and a continued buyers' market for risk management services.

At the top of the food chain, Marsh & McLennan Cos. Inc. and Aon Corp. appear to be battling it out to be the world's largest broker, making several key acquisitions and taking other large players off the board. In the process, they clearly have enhanced their presence in key markets, such as retail and reinsurance brokerage, captive management and consulting, and offer much to risk managers. Indeed, since last July, five of the world's 20 largest brokers have been absorbed by these and other brokers.

The next-largest players-Sedgwick Group P.L.C. and Willis Corroon Group P.L.C.-are the subject of market rumors on whether they will merge with one another, acquire other firms or be acquired themselves.

Below them are countless other strong brokers that offer many of the same services as the big players, though through fewer offices and with fewer people. Some of these smaller brokers undoubtedly will merge or be acquired in an effort to boost their competitive stature. But others may find they have a competitive advantage just as they are.

Not all buyers want to place all their eggs in the baskets of a few megabrokers.

The current consolidation in the market gives Sedgwick, Willis and smaller brokers a key opportunity-if they take advantage of it-to compete for business that previously might not have looked twice at them as viable service providers.

We expect the so-called second-tier brokers to compete aggressively with the biggest brokers, positioning themselves as more specialized, more customer-focused, more innovative or more flexible.

To meet the needs of large buyers, many smaller brokers will certainly need to boost their capabilities in key areas: global reach, consulting and alternative risk financing, to name a few. Those that can demonstrate proficiency in these and other risk management services should find themselves with new business while enhancing their service to existing clients.

To be sure, consolidation will continue as smaller brokers look to acquire or form strategic partnerships to complement their abilities. This situation also may provide an opportunity for non-traditional players to enter the brokerage business, including retail and investment banks that have been eying insurance. And, who knows, perhaps even insurers and broad-based financial services companies will acquire brokers.

Ultimately, we think buyers will benefit from the competition for their business and a range of new options to choose from. While some may be feeling the pinch of consolidation now, they should not lose sight of the fact that the customer is king.