The planned acquisition of insurance broker JLT (Jardine Lloyd Thompson) by industry giant Marsh & McClennan, in a deal valued at US$5.7 billion – a near 30 times multiple of its earnings, has led many to ask what this will mean for space insurance. The deal goes to a vote of JLT shareholders in November and requires a 75% majority.
Peter Elson, Chief Executive of the Aerospace arm of JLT, said he could not directly comment on the deal and noted that it was too early to say how his team would be integrated into the new firm if the deal were agreed. Some insurance broking classes at JLT are expected to suffer job losses, however, even if the highly profitable share sale will soften the fall for some.
Under Elson’s reign, JLT’s aerospace operation has won some important clients on the space insurance front, especially Arabsat and Virgin Orbit. Nevertheless, it still remains a relative minnow compared with its suitor Marsh or competitors Willis Towers Watson and Aon ISB.
While the acquisition may cause employment angst among the small space team at JLT, this just adds to the worry that space insurance as a whole is a lot less profitable than it used to be. A combination of falling rates and the low number of GEO communications satellite orders – and hence launches, the bread and butter of space insurance – have caused premium levels to decline while losses have remained steady. Given that brokers take a percentage of the premium for the deals done, this decline does not bode well for the space insurance broking arm of Marsh-JLT (or whatever it may be called), or for any of its competitors.
Gross premium levels for space insurance for this year are expected to total circa US$450 million – about half what they were ten years ago – with losses and claims logged on Seradata’s SpaceTrak database currently running at about US$100 million less than that.
Update on 15 March 2019: While Marsh will take over JLT, its aerospace division is going elsewhere. To assuage EU competition regulatory concern of market dominance in airline insurance, the JLT aerospace division is instead now being purchased by the broking firm Gallaghers.
