law
Clyde & Co and BLM Merger: The Pressures Facing Insurance Firms
There is a fierce battle between law firms to be on insurance panels; some think that pressure for consolidation is growing.
The second-largest law firm merger to ever occur across the U.K. is currently happening. What has caused Clyde & Co and BLM to merge their 2,600 lawyers?
For BLM, an audit in 2019 put the company in doubt about whether the pressures of the market forced an arrangement.
“We recognized at the time there was going to be more consolidation in the U.K. insurance market,” BLM’s senior associate Matthew Harrington. “We concluded that a merger would provide us with the scale and resources that we really needed to invest in people, processes, and technology.”
The need for consolidation is driven by insurance companies’ needs, as per James Cooper, chair of Clyde & Company’s global insurer practice team.
“Insurers, especially in the casualty space, are looking to consolidate panels so they can get more services from fewer providers and they also expect technology, data, and innovation to be offered.”
A few years ago, it didn’t matter as much. In 2017, for instance, it was the case that AIG, the U.S. Insurance giant AIG, appointed 29 companies as members of the U.K. legal panel, comprising Clifford Chance, DLA Piper, and RPC. However, the times have changed. Last year, Zurich Insurance appointed just four firms to its panel of companies to deal with complex and large claims across the Asia Pacific. As an aside, two of those companies included Clyde & Co and BLM.
According to Cooper, a lot of insurance companies were restricting their panel size to a small number. They added that there are numerous legal companies in the insurance industry and that the growing insurance companies’ demand for panels that are consolidated are two factors that are putting pressure on law firms to combine.
“If you want to remain competitive and win market share, then finding like-minded organizations with a complementary range of services and specialisms to combine with is a good formula and one we’ve followed in the past.”
According to someone who knows the matter, the newly merged firm will represent clients that include Zurich Insurance, Direct Line, Hastings, and AIG.
to merge, or whether the merge
Will other companies in the insurance sector follow BLM’s example and think that a merger might be the best way to secure an increase in market share?
The London-based insurance practice director who isn’t so confident about the Clydes merger will trigger an influx of consolidation within the industry.
While they think that there’s a desire for larger composite insurers to limit their panels to just one or two companies, They say that it isn’t a recent phenomenon. Instead, it is the trend that began around seven or eight years back.
They are also skeptical that the merger would need a shift in thinking of the top law firms that operate in the insurance industry.
“From my point of view, the merger has been in the news for some time and is still in the news. Did it alter the dynamics that my customers have been wanting from me when the news first was announced? Absolutely not.”
They believe that the market isn’t as crowded as the recently joined Clyde & Co makes out: “As long as firms play to their strengths, there’s tons of opportunity in this insurance market.”
What’s is next?
Many insurance companies seem to be trying to get a smaller amount of panel positions.
Other major lawful players in the insurance sector comprise Keoghs, DAC Beachcroft, DWF, RPC, Kennedys, Plexus, Weightmans, Horwich Farrelly, and Browne Jacobson.
In the top portion of this range, which is behind Clyde & Co, companies like DWF had revenues of PS338.1 million in the year before and DAC Beachcroft with revenues of PS275 million.
However, Weightmans and Browne Jacobson are companies below PS100 million in turnover, with the fiscal year ending April 30th, 2021, at PS94.7 million and PS84.9 million, respectively, according to Companies House.
The advantages of scale can be debated According to some. Simon Laird, global head of insurance at RPC, stated that its mission “has never been to be the biggest” rather listen to clients when they tell them what they want.
However, for BLM, it is believed that consolidation can open opportunities that would have been impossible if they had decided to pursue the process independently. Matthew Harrington puts it: “If you want to remain competitive–you want to win more market share.”
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