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Risk managers have conflicting feelings about the latest in a string of mergers and acquisitions among large brokers.

Many clients of the two companies welcome the deal and the added global resources it will bring to Marsh & McLennan Cos. Inc. and Sedgwick Group P.L.C. But a number of risk managers, including some clients, say that while they have no complaint with this particular deal or the players involved, they are opposed to continued broker consolidation because it will leave the market with fewer choices and less competition.

Some risk managers have even raised the question of whether the continued consolidation deserves Federal Trade Commission scrutiny.

Other insurance brokers, though, say they welcome the consolidation because they stand to gain new clients and staff who may seek alternatives to the ever-growing megabrokers.

Clients of M&M and Sedgwick are generally receptive to the deal.

Marsh & McLennan and Sedgwick "are both very reputable brokerage houses. I don't have a problem with either of them or this particular deal," said Michael Tawney, executive vp-risk management at Houston-based Loomis, Fargo & Co., a Sedgwick client. Mr. Tawney was on Business Insurance's 1996 Risk Management Honor Roll.

M&M's acquisition of Sedgwick will give the broker a "much, much stronger presence worldwide," noted Pat Evers, director-global risk management at Fort James Corp.

The Deerfield, Ill.-based consumer products company uses J&H Marsh & McLennan for insurance placements in Europe, Russia and Turkey.

And despite an often-heard complaint that customer service may suffer in a merger or acquisition, Ms. Evers says that has not been her experience.

Fort James benefited from the increased international strength that resulted from M&M's acquisition of Johnson & Higgins and expects to benefit further if the proposed Sedgwick purchase goes through, she said.

"I think, generally, the acquiring brokers have been very concerned to maintain relationships with existing clients," said Henry Labram, head of insurance for British Petroleum Co. P.L.C., which deals with all the major brokers. "On the whole, the continuation of service has been very good," he said.

A bigger broker with more resources "is more likely to have wider global coverage and stronger centers of excellence in a particular field," Mr. Labram said.

The merger of M&M and J&H did not diminish the high level of service that United Biscuits (Holdings) P.L.C. previously received from M&M alone, said David Finch, group insurance manager and risk adviser to the Middlesex, England-based company.

United Biscuits continues to deal with nearly the same broker team as before that merger. J&H Marsh & McLennan took "great pains to provide us with that continuity," because it knows the client demands that, Mr. Finch said.

He acknowledged, however, that as a former employee of Marsh & McLennan, he may be able to more effectively express his demands to the broker than can other risk managers.

While satisfied with their own brokers, some clients are wary of the consolidation trend overall.

"I'm opposed in general to consolidation. The more consolidation we see in the industry, the more it's going to be choking off creative solutions," said Mr. Tawney of Loomis, Fargo & Co.

Fort James' Ms. Evers said there "needs to be competition in order for all risk management professionals to make certain they are getting the services they need."

"We're disappointed that for a multinational company such as we are, there's a reduction in options available," said Mr. Finch of United Biscuits. While United Biscuits' sole broker is J&H Marsh & McLennan, the company likes to have the option to put its account out for bid periodically, he said. With less choice among large brokers, however, the company will have to consider other options.

One possibility, Mr. Finch said, would be to go without a full-time broker and simply purchase brokerage services as needed. Another option would be to use smaller brokers that could partner with other independent brokers to provide local service across the approximately 20 countries where United Biscuits does business.

We're "not going to be held to ransom" by the megabrokers, he stressed.

Christopher Duncan is the director of risk management and field security for Frito Lay U.S. in Dallas. He was sufficiently concerned about the effects of consolidation that he posted an e-mail on RISKWeb last Tuesday, encouraging risk managers to contact the FTC's Bureau of Competition with their opinions.

"It's not a matter of whether this deal is a good or bad deal but that the choices are decreasing," Mr. Duncan said in an interview about the latest acquisition.

Risk managers "are very concerned about the continuing consolidation in the brokerage industry and what that means for the future of the insurance market," he said. "At the end of the day, we in the risk management group have an obligation to discuss our opinion of the health and future competition of the insurance marketplace. We should make our voices heard. We haven't taken enough action."

Mr. Duncan's e-mail generated quite a bit of discussion on RISKWeb, he said. Shortly after its posting, several people responded that if Mr. Duncan were to draft a letter detailing buyer concerns regarding brokerage consolidation to William J. Baer, director of the FTC's Bureau of Competition, they would sign it.

Frito Lay is a Sedgwick client in Dallas, while its parent, PepsiCo Inc., is a client of J&H Marsh & McLennan.

Mark A. DeLillo, president of the Risk & Insurance Management Society Inc., said the key issues raised by consolidation are whether the trend results in a lack of choice for buyers and whether the megabrokers' clout gives them undue influence in the insurance marketplace.

Risk managers must "make a determination as to whether mergers and acquisitions have a material impact on their programs and the way business is conducted. From that point, the market will dictate what's appropriate," he said.

RIMS' mission "is to educate our members and other commercial insurance purchasers and let them make an informed decision," Mr. DeLillo said.

He said RIMS tells members to explore the options available to them for voicing their concerns and to do what's in the best interest of their organizations.

Mr. DeLillo, vp-risk management at Celotex Corp. in Tampa, Fla., does not deal with either J&H Marsh & McLennan or Sedgwick.

David Gamble, executive director of the U.K. Assn. of Insurance & Risk Managers, said that while some of AIRMIC's members are concerned about reduced choice, others are not worried about the deal.

"A number of very large companies aren't really very concerned" generally because they self-insure a lot of their business, Mr. Gamble said. Those with mainly U.K. operations also aren't too worried, he said.

Big multinational companies, however, are concerned about a reduced choice of brokers capable of meeting their needs. "The strongest concern is lack of choice for global programs," Mr. Gamble said.

Other brokers, particularly regional companies, are ready to pick up any slack.

"I don't believe that it's particularly good for the industry overall for two megabrokers to get considerably larger than what they are," said William Cohen Jr., CEO of Insurance Management Associates Inc., a Wichita, Kan.-based regional broker. There is considerable pressure on the distribution system and on how insurance companies respond to the megabrokers vs. other agents and brokers, he said.

"On the other hand, it's absolutely great for the large regional brokers such as ourselves," Mr. Cohen said. Not only are insurers going to respond more to the second-tiered brokers but also there will be a "release of entrepreneurial people from those companies that do not want to be involved in a large conglomerate."

So, for regional brokers, the deal will create "big, big advantages over the next few months that we've not experienced before," he said.

John McGrath, president of Hobbs Group of California in San Francisco, agreed. All the consolidation "is not necessarily great for the customers or for markets, but I think it is great for regional brokers in the risk management field," he said.

"These mergers always create opportunities for Lockton," said David M. Lockton, president of Lockton Cos., a Prairie Village, Kan.-based broker.

He said that this week, Lockton, Sedgwick and M&M are scheduled to make competing proposals to a company. "It will be interesting to see how they manage that," he said.

Large international brokers also see opportunities as a result of consolidation among the megabrokers.

The M&M/Sedgwick deal "really reinforces our strategic position as now the third-largest global broker," said Kenneth Pinkston, chairman of Willis Corroon Corp. in Nashville.

"I think we're in a position to grow," he noted, adding that despite the difference in size, "we will be able to compete with Marsh and Aon effectively."

This latest deal "reinforces our position as one of the very few remaining independent brokers with international and global capabilities across all sectors," echoed William Wilks, finance director of Lambert Fenchurch Group P.L.C., which will become the world's seventh-largest broker as a result of the M&M/Sedgwick deal. "It has removed one of our major competitors."

Sarah Goddard and Sally Roberts contributed to this report.