competitive insurance market has led to increasing concern that brokers are wielding too much power in the industry.

Concern has been expressed from both insurers and buyers about the issue, especially since the announced consolidations in the broker market.

Asked about it recently, EXEL Ltd. president and CEO, Brian O'Hara said, "Whenever you have choices pared down dramatically, it's a dynamic that you have to be concerned about, in terms of concentration of power and abuse of position. I haven't seen anything like that yet, but I guess it is something to keep an eye on, to ensure the balance of power remains correct.'' The concerns come in a soft market with declining insurance prices. A broker's commission is based on a percentage of the price. With the price going down, they may naturally seek a higher percentage.

The merger of Aon and A&A, and the consolidation of Marsh & McLennan and Johnson & Higgins, has moved Sedgwick Plc up from the fifth largest to the third largest broker, without them making any real moves. That's not to say they are standing still.

Already, the London-listed broker a week ago began trading in New York (NYSE:SED), intending to increase its visibility and broaden its ownership base in the world's largest capital market.

Sedgwick Management Services (Bermuda) Ltd. president, Denville Reed, would not say the move is unrelated to market consolidation.

He said, "Concern about the power of brokers seems to be driven more by the consolidation in the industry, than by any other factor. There are sectors of the industry that consider that two gigantic conglomerates may well be trying to use that muscle to orchestrate much stronger pricing deals.'' As a result of the industry consolidations, even the third largest broker is a distant third to the two largest players. Sedgwick is making it clear, though, that they are very much open for business, almost as if they believe there will be some anxiety among buyers and insurers over the size of the two largest players.

Sedgwick is pushing the theme: We are big enough to matter and small enough to care. They want buyers to see them with their own culture and standards.

Gregory W. Springer, president and CEO of Aon Group (Bermuda) Ltd. said, "The issue is more fundamental even than a clash or battle between brokers and insurers. The core of the issue is what the clients want or need, and what they are willing to pay for. Brokers could be as greedy as they want, but if that makes the product uncompetitive, they would have no success, because they would have few clients.

"I think there is a balance, which is driven by the clients. That's the real fundamental equation. The consolidation in the market undoubtedly does give more power to the brokers, but hopefully the merger activity will lead to us being able to create, along with the insurers, better, more competitive products ultimately for the client.

"If that succeeds, we all win. The insurers win by stepping up to the plate, being creative, innovative and cost conscious. We brokers win and the client wins.'' Said Mr. Reed, "We've already heard from some buyers the concern that the two largest players may be too large. They wonder if they are becoming a money function rather than a service function. We've already heard from people who would rather be in our camp than be gobbled up by the bigger ones.

"But I think some major corporations will be more comfortable with large brokers, and remember this consolidation has also occurred in the insurance markets.

"What tends to happen in this situation is that smaller brokers end up concentrating on more niche sectors, looking for something that gives them a differentiation statement.

"But I think there will probably be more consolidation in the future in the middle to small brokers.

Mr. Springer said, "The customers clearly have already voted with their pocketbooks. That's why the margins in the insurance broking business worldwide have been dropping so dramatically over the last ten years. The clients have already said there were too many brokers and they were too inefficient.''