Lockton Re plans to use its tech capabilities and market “goodwill” towards its retail brand to compete with Aon and Guy Carpenter, according to CEO Tim Gardner.
The executive, whose move to Lockton Re from Guy Carpenter prompted a highly publicised lawsuit, said the consolidation at the top of the reinsurance broking marketplace had instilled a “yearning for choice” among clients.
“The hypothesis that we carried, that the market needs choice, that there is room for competing brokers to come into the space… and present a different value proposition, [is] more real now than the year and a half ago when we first started,” said Gardner.
“It’s a difficult environment for reinsurers if in the future you get 80%-90% of their business from two sources. That’s not really a marketplace for them.”
Gardner said that the barrier for entry into the reinsurance broking market was not as high as it had once been thanks to technological advances and the ability to procure talent.
“Both of those have been great levellers in terms of the ability to bring something incredibly dynamic to clients, on a smaller scale,” said Gardner.
“I don’t believe that size is the be all and end all of a reinsurance broker relationship. I think you can be more nimble, I think you can be more hungry, I think you can build a culture that is more conducive to collaboration and getting the best solutions forward, and you can be more technologically advanced.”
Gardner added that Lockton Re has the advantage of having no legacy technology systems to manage.
“If you’re going to build the reinsurance broker that can compete, analytics and technology has to be at the forefront of your offering,” he said.
“If I think of the publicly traded reinsurance brokers, the large predominance of their expenditure goes towards running the existing framework. It’s not changing the business, it’s not changing the technology, it’s simply running antiquated legacy systems because they’re expensive to keep up.
“The amount of investment they’re actually pushing towards changing the business and bringing new innovative tools and technology is pretty minimal.
“We know that we can, on a smaller platform… bring really compelling new technologies to bear.”
More recently Lockton Re has hired former Aon retro executives Bob Bisset and Matthew Foreman among several others.
“Because of so much disruption, the recruiting pipelines and the opportunity to add value to our business is pretty unparalleled; I’ve never seen a recruiting market like this in my 27 years in the business,” said Gardner.
Alongside talent and technology, Gardner said Lockton Re would bring to bear its parent company’s reputation in the retail space.
“Lockton has some tremendous relationships just because of the size of the retail footprint. There’s a lot of goodwill in the market because of the Lockton brand and trading relationship,” he said.
Following on from Covid-19 as well as several years of cat losses and deterioration on casualty books, Gardner said he expected rate increases at 1 January.
“There’s certainly enough out there that would speak to the need for primary rate increases, we’re seeing that in all lines and geographies, and there’s absolutely a need for more money in the system on the reinsurance side and the retro side,” said Gardner.
However, he added: “We believe that every deal needs to be written and evaluated on its own merits.
“There are deals that will certainly need rate and there are others where we think there is room for softening, where the client perhaps is getting really comfortable rates on the front end, tightening terms and conditions, reducing limits and reducing volatility across the portfolio.”
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