The Broker Who Knew Too Much
A senior account manager at an insurance broker is negotiating a large commercial renewal. The client's finance director mentions in a call that the company is about to announce a profit warning and that a key contract is likely to be lost. The account manager knows this information is not public and would materially affect the risk. The renewal submission to insurers does not mention it. The account manager also holds a personal shareholding in the client company. The placing is due in five days, and the account manager's bonus depends on the renewal being placed at or above the target premium. The compliance officer has asked whether there is anything the account manager should disclose before the submission is finalised. The account manager is considering saying nothing because the information came from the client in confidence.
1. Assess the account manager's professional and ethical obligations regarding the undisclosed information and the personal shareholding.
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The account manager faces two separate conflicts that both require disclosure. First, the profit warning and likely contract loss are material facts that a prudent underwriter would want to know. Presenting a submission that omits them risks misrepresentation and could invalidate cover or expose the broker to a negligence claim. The fact that the client disclosed the information in confidence does not entitle the broker to pass it to insurers without consent, but it does require the broker to tell the client that the omission may prejudice the placement and to seek authority to disclose or to withdraw the submission. Silence is not a neutral option. Second, the personal shareholding is a direct conflict of interest: the account manager benefits personally from information that could move the share price, and the bonus creates an additional incentive to place the renewal regardless of the risk. Both conflicts must be declared to the compliance officer and, where appropriate, to the client, and the account manager should be removed from the placing decision.
2. Recommend how the firm should handle the placement and the account manager's position, and explain the reasoning.
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The firm should pause the submission until the disclosure question is resolved. It should advise the client in writing that the material facts must be disclosed to insurers or the placement cannot proceed on a informed basis, and obtain the client's instructions. If the client refuses, the firm should decline to place the risk rather than submit a misleading presentation. On the shareholding, the firm should require the account manager to declare the interest, remove them from the renewal negotiation and any trading decisions, and consider whether a Chinese wall or divestment is needed. The bonus should not be paid on a placement that breaches these controls. The compliance officer should document the conflict, the client communication, and the decision. The reasoning is that the broker's duty is to present the risk fairly to insurers and to act in the client's interest, and neither duty is served by concealment. The account manager's personal interest and the confidentiality claim both point the same way: escalate, disclose, and let the client decide with full advice.