Wholesale broker
An intermediary sitting between the client's broker and the risk carriers, providing access to specialist markets the retail broker lacks.
On 26 May 2023 State Farm announced it would stop accepting new homeowners business in California. The risks admitted carriers drop in this way go to the FAIR Plan or to the excess and surplus lines market, and that is where the wholesale broker works. It never meets the insured. Its client is the retail broker, who hands over a risk it cannot place, because the risk is unusual, too large for its usual markets, or falls in surplus lines where it has neither license nor relationship. The wholesaler brings access to specialist carriers, Lloyd's syndicates and coverholders' binders, drafting skill on rare risks, and the ability to split a line across several insurers. Its commission comes on top of the retail broker's. The chain gets longer, so does the total cost borne by the insured, and conduct regulators regularly look at what each link delivers to the client. The wholesaler's weight grows in a hard market, and the share of premium routed through it is a good leading indicator of how hard the cycle has become.
In the United States, the growth of the excess and surplus lines market from 2019 onward, fed by admitted carriers withdrawing from wildfire and liability risks, mechanically increased the share of premium routed through wholesale brokers, since access to that market is reserved to them in most states.
Wholesale broker, wholesale insurance broker
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