The ranking of the world's largest reinsurance intermediaries also serves as a list of some brand-new players in the global reinsurance market.

Over the past 12 months, such household names as Alexander Reinsurance Intermediaries Inc., Minet Re and Willcox Inc. Reinsurance Intermediaries have been lost in the consolidation frenzy, while Aon Re Worldwide Inc. and Guy Carpenter & Co. Inc. emerged as more dominant players.

At the same time, other reinsurance brokers also have joined forces to form new global players.

Benfield Ellinger Ltd. and Greig Fester Group Ltd. are scheduled to complete their merger today, creating Benfield Greig Group P.L.C., the world's fourth-largest reinsurance intermediary.

In February, the reinsurance arms of JIB Group P.L.C. and Lloyd Thompson Group P.L.C. merged to form No. 8 Jardine Lloyd Thompson Reinsurance Holdings Ltd.

That same month, the merger of Lambert Group Holdings P.L.C. and Fenchurch P.L.C. helped boost the reinsurance revenues of No. 10 intermediary Lambert Fenchurch Group P.L.C.

While brokers grapple with the consolidation, ceding companies continue to demand more tailored reinsurance products and more value-added services in a competitive market where prices continue to deteriorate.

"I have been in the reinsurance business since 1962, and I've never seen a time of so much change and so much challenge at the same time," said Jacobus Van de Graaf, managing director and chief executive officer of Towers Perrin Reinsurance, the world's ninth-largest reinsurance intermediary.

"I think this business has changed more in the last three years than in the last 30 years, and in the next three years it will change as much, if not more," Mr. Van de Graaf said.

Due to the changing face of the brokerage industry, Business Insurance for the first time is ranking the 10 largest worldwide reinsurance intermediaries. In previous years, BI ranked the largest U.S.-based intermediaries based on reinsurance brokerage revenues generated by all companies that report to that entity.

Overall, competitive market conditions hampered internal growth at many global reinsurance intermediaries in 1996. Acquisitions, however, more than made up for any shortfalls.

Aon Re posted the largest revenue gains, with a 183.2% increase to $543.7 million in pro-forma gross revenues, most of which is attributable to five acquisitions it made over the past 12 months. Excluding acquisitions, revenues grew by 5% to 7%.

Double-digit revenue increases at Guy Carpenter and Jardine Lloyd Thompson also were attributable to acquisitions. Guy Carpenter's revenues rose 16.2% to $373 million, while Jardine's increased 37.2% to $67.1 million.

Sedgwick Re reported a 1.5% drop in revenues to $128 million, while Le Blanc de Nicolay Reassurances' revenues were down 5.7% to $71.7 million. Towers Perrin Re reported a modest 2.4% increase to $42.5 million.

Willis Faber Global Reinsurance, E.W. Blanch Co. and Lambert Fenchurch Group all reported healthy top line growth.

Brokers involved in the past year's megamergers say ceding companies are now benefiting from larger, better-quality companies with more resources.

"Although there are fewer markets to trade with, the quality of security, level of services and competition among reinsurers in today's market is highly favorable for our clients," said Mike Bungert, president and CEO of Chicago-based Aon Re Inc., the U.S. arm of Aon Re Worldwide.

Said David Spiller, managing director of newly created Benfield Greig Group,. "Our clients think, 'Thank God we work with an independent intermediary of some substance.' "

The reinsurance premium pie is becoming smaller as (insurance company) consolidations take place, "but ours is a much stronger position. . .because we are the only major independent global reinsurance broker in the world," Mr. Spiller said.

Reinsurance intermediaries not involved in the merger frenzy say they are challenged by the changing environment but are optimistic about their futures.

"We have enjoyed growth in new accounts from ceding companies and individual brokers who are not interested in associations with a megabroker," said Salvatore D. Zaffino, chairman and CEO of Hartford, Conn.-based Sedgwick Re, the world's fifth-largest reinsurance intermediary.

"The marketing clout of megabrokers can be daunting at times," he acknowledges. "But Sedgwick Re has sufficient global presence to effectively compete with even the largest of the global brokers."

David Corben, chairman and CEO of JLT Reinsurance in London, said that when looking at the big picture with fewer brokers, "it clearly leaves us up there as the alternative broker."

"The opportunities that presents are enormous, because I think a lot of the buyers want more of a choice of brokers," he said. "A lot of people who we didn't deal with have come to us in the last six months because they don't want all their eggs in one basket. If we continue to be very client-focused, flexible, quick on our feet-which we can be with an organization of this size and structure-we can give a lot to the client."

Despite the optimism, many brokers expressed concern over the clout that Aon Re and Guy Carpenter, in particular, now wield due to their size.

"I grew up in the business where people bought reinsurance based on the quality of service and the value provided to the client. I still believe that's the way business should be done," said Mr. Van de Graaf of Towers Perrin Re.

However, the megamergers have increased the amount of leverage being used with customers. While most reinsurance brokers use leveraging to an extent, "it used to be quiet and subtle, not with a baseball bat," he said.

Both Aon Re and Guy Carpenter say they continue to win business based on their quality and the value they bring, not on their size and clout.

"Size seems to be an advantage or a curse, depending on which side of the equation you are on," said Rocker Channell, president of Aon Re Worldwide.

"Aon continues to do business the way we always have. We cede business to markets based on the ability to meet our clients' needs," he said.

Edmund R. Megna Jr., president and CEO of the U.S. business of Guy Carpenter & Co., added, "We'd rather win business based on our expertise and professionalism rather than through leveraging."

As brokers still sort out the effects of consolidation, they agree that the merger and acquisition movement is not over yet.

"Unfortunately, I think there will be more consolidation with primary insurers, brokers, reinsurers, and reinsurance intermediary companies. I'm not sure if this is good for the business. Bigness does not necessarily denote better," Mr. Van de Graaf said. "Everyone seems to think bigness is best."

"It's not necessarily over yet," agreed Chris L. Walker, chairman and CEO of E.W. Blanch Co. in Bloomington, Minn., the world's sixth-largest reinsurance intermediary. "I think there will be consolidation both in the direct writing and brokerage market and certainly more intermediary consolidation."

Sedgwick Re's Mr. Zaffino said that while merger and acquisition activity will continue, "the merger of large intermediaries may slow in the short term, because of the fact that there are fewer large candidates remaining and their focus will be on the integration of recent mergers and acquisitions."

On the other hand, he predicted that "smaller brokers will face increasing competitive pressures, because they simply lack the resources to provide the value-added services that now represent the threshold level of commitment expected by today's reinsurance buyers."

Indeed, ceding companies continue to demand more value for their reinsurance dollar and more creativity to solve all of their reinsurance and financial needs, brokers report.

As a result, most reinsurance brokers today offer catastrophe and financial modeling services. Many continue to enhance those capabilities (see story, page 23).

The idea of transferring risk to the capital markets also has become more of a reality.

Over the past year, Aon Re placed three catastrophe put programs with clients. Both Aon Re and Guy Carpenter have created new units devoted to capital market endeavors.

But aside from tapping capital markets, ceding companies are finding other ways of protecting themselves in the traditional reinsurance markets, noted John Pelly, chairman and CEO of London-based Willis Faber Global Reinsurance, the world's third-largest intermediary. "There are other very exciting new forms of conventional reinsurance to protect clients" in an increasingly attractive manner, Mr. Pelly said.

Reinsurers, flush with capital, are prepared, for example, to consider holistic risk programs that include currency, equity or bond risks as well as traditional property/casualty risks, Mr. Pelly said.

Twenty years ago, a reinsurance intermediary just had to be "transactional" in placing coverages with reinsurers, added Peter T. Pruitt, chairman and CEO of Willis Faber North America Inc. in New York. "Today, of our time spent with our clients, a third is analytical (analyzing risks and placements); a third is in the consulting arena; and about a third is in the transaction."

Aside from employing brokers, reinsurance intermediaries today now hire lawyers, mathematicians, high-caliber consultants and financial analysts to provide new products to their clients who are demanding more, he said.

Overall, reinsurance brokers say a majority of ceding companies continue to retain more risk, but many say they see the tide changing.

"Despite the extended soft market, ceding companies until recently have resisted buying additional reinsurance based solely on attractive reinsurance rates," said Sedgwick's Mr. Zaffino.

However, "recently we have seen some ceding companies capitalizing on attractive reinsurance rates and using the reinsurance market to support efforts to maintain market share in a competitive primary insurance environment," he said. "This opportunistic buying is still the exception rather than the rule."

Guy Carpenter's Mr. Megna said he, too, is beginning to see some ceding companies take down their retention levels due to the soft market.

Overall, retentions have been increasing over the past three to four years, he said. "I don't think we'll see increases to the degree we have in the past," he said.

Profiles of the world's largest reinsurance intermediaries follow: