Complacency opens the door to the French market
17th February 2016
Tunbridge Wells is home to a variety of financial firms dealing in a range of products from banking to stockbroking and currency trading to fund management.
These companies have embraced the process of globalisation, which allows them to invest money on behalf of their clients in markets all over the world.
But perhaps the best example of this trend is the town's largest private employer, AXA, a French multinational insurer with revenues of £72billion.
However, while most of AXA's profit ends up in French hands, boosting their exchequer in the process, there is one Tunbridge Wells-based insurance underwriter playing its own small part in rectifying the imbalance.
United Brokers International Ltd (UBI) may be based in Lonsdale Gardens, but 100 per cent of its clients come from France.
"We are doing our bit to help rebalance the UK's balance of payments and are very happy to do so," said Chairman Harvey Wetherill, one of just two employees who are English. The other nine are French nationals.
With the UK recording its biggest trade deficit for goods on record last year, at £125billion, the country is more than ever relying on the £90billion surplus generated by services such as those provided by UBI to make up the shortfall.
Trading for just under a year, the board at UBI is made up of industry veterans looking to take advantage of their many contacts in the London insurance market and the French broker market.
Key members, in addition to Mr Wetherill, include directors Alan Clarke, Pierre Cornet and his father Michel, all of whom have a background in French insurance. Collectively they have 140 years of experience in the field.
With a focus on the French real estate sector, the company offers 'Dommages Ouvrages' (DOs), a form of compulsory prepayment insurance.
Mr Wetherill explained: "This form of product is used to insure against building defects.
"For example, people may take out the policy to cover them upon the purchase of a house in case it later comes to light that there are structural issues with it."
The company does not sell direct to the end user, but instead works with a network of around 70 brokers throughout France, a number it is looking to increase as it targets the £3billion construction insurance market.
It then underwrites the policy on behalf of a syndicate in Lloyd's of London, with permission to take on up to €15million of risk per policy at their own discretion.
Mr Wetherill added: "In essence, the reason we are focusing on that particular sector in France is because it is a highly consolidated market.
"About 95 per cent of it is dominated by just seven insurers.
"That means that for the man in the street and the broker there is only a limited range of companies they can buy that product from.
"This generally leads to either complacency on the part of insurers, because they know there is not much competition, or not a great deal of competitive pricing and servicing."
He said this allows the company to provide an alternative in the form of a flexible and individually tailored service to brokers who are used to a 'take it or leave it' attitude from the big players.
"Part of the reason for not being based in France is because we do not want to be labelled as part of the 'establishment'.
We mark ourselves out as being different by being in the UK," he explained.
Some of the flexibility they are able to offer stems from their affiliation to Lloyd's of London, the world's largest insurance market, where hundreds of brokers and syndicates trade products and pool risk.
In 2014 Lloyd's, whose motto is Fidentia, Latin for 'confidence', generated £25billion of premiums.
Managing director Mr Pierre Cornet said: "Because we are associated with a brand name recognised internationally, there is never any question of our authenticity.
"Potential clients may not know us, but everyone knows Lloyd's, so that provides them with the comfort that they are dealing with something secure."
Although the prevailing narrative in economics is that the UK is a far more free market than its continental neighbours, Mr Cornet said regulation of the insurance industry in Britain was in fact 'far more onerous'.
"The approach to insurance is the same, it is about building relationships and trust with your clients, and the culture in the industry is similar.
"However, it is a more difficult and expensive process to be authorised in the UK than in France. Considerably so.
Mr Wetherill said being located in Tunbridge Wells and not its target market was a trade-off.
"From a marketing and branding point of view it is better to be outside of France and we understand the business environment here better.
"We are well connected to London, which is the insurance capital of the world and the location of Lloyd's, so it is very convenient for the insurers to get to us on the train.
"Plus we would have to learn an entirely different tax code and accounting rules if we moved to France.
"But from a compliance and regulatory point of view, it is not an advantage to be in the UK."
Although the company sees room for expansion, and has secured enough office space for this, Mr Cornet wants UBI to continue to offer a bespoke service.
He said: "What we are seeing is a polarisation in the market. A lot of insurance has become commoditised, which has been brought about by electronic trading.
"It is large scale and needs big economies of scale to make it viable.
"Then you have the other side, which is the way Lloyd's works, by creating a large mass through a range of bespoke individual products from around the world.
"We are part of that and do not want to lose our level of service by overexpanding."
Mr Wetherill believes the company will look to offer a wider range of products but will continue to focus exclusively on the French market for the foreseeable future.
Mr Cornet does not think UBI's desire to employ a high level of native French speakers will hinder expansion.
He said: "London alone has around 250,000 French people, effectively making it one of the top ten largest French cities in the world. I do not think we will have a problem filling roles."
For a company which derives all of its income from mainland Europe, the benefits of EU membership are not lost on its board members.
Mr Wetherill said: "We wouldn't be able to establish our business without the freedom of services legislation within the European market. We only exist because Europe has existed in the way it has.
"From our point of view, it is probably best to embrace the opportunities out there rather than shy away from them. There is a lot of business to be had in Europe and to access that is good for all of us. The upcoming vote does create uncertainty for us but we are ploughing on and will cross that bridge when we come to it.
"One thing is for sure, we do not want to stop our income flowing into the UK so we will find a way to continue making that happen."