A good time to be nimble

At such a challenging time for the market, buyers are increasingly seeking new and alternative solutions, meaning that smaller, innovative brokers can thrive, as Mark Waterkeyn and Mark Finch from Lockton Re tell Baden-Baden Today.

Reinsurers have been facing challenging market conditions for several years. The combination of a soft market and low investment returns is being compounded by a trend of cedants also buying less reinsurance as they look to cut costs by rationalising their reinsurance programmes.

Consolidation between insurers is further exacerbating this trend, but this dynamic can offer opportunities for smaller reinsurance brokers with the time and expertise to offer clients something different, says Mark Waterkeyn, partner at Lockton Re. 
He argues that for brokers with the right skills, this can be a good time to be a broker.

“It allows us to be creative,” Waterkeyn says. “We cannot ignore the macro dynamics of the industry but whether that means it is a good time to be a broker depends on who you ask. If you are independent and very focused on a client’s real needs, the competition between reinsurers also means that some very interesting solutions can be devised.”

Lockton Re is best known in the market for managing long-tail, niche and specialist lines; it also handles property-catastrophe business but it is in these more complex and nuanced areas it has the greatest reputation.

Mark Finch, international business development executive, Lockton Re, says that although the Lockton Group is the ninth biggest broker in the world with revenues of $1.34 billion, its reinsurance unit in particular is not encumbered by the high costs associated with large consultancy-related departments or the constant drive for growth (combined with constant cost cutting) that so defines the largest brokers in the market.

Increasingly, Finch says, buyers are appreciating this difference and want to work with Lockton Re.

“We are not having to fund the huge fixed costs associated with being a publicly quoted company, we are much more client-focused and we ensure individual brokers have the time to spend with clients, understanding their needs and developing solutions,” Finch says.

“We have a very flat internal structure with experts in their fields but everything we do is focused on achieving the best outcome for clients.”

Lockton Re has an impressive analytical platform focused around bespoke actuarial modelling and furthermore, analysts and actuaries are embedded within actual client account teams. This bucks the trend seen at other broking houses which has in effect emulated the large management consultancies. “But that is not what many reinsurance buyers necessarily want in this market,” he says.

The time is right

He argues that as the bigger players grapple with the distraction of seeking growth and legacy issues around previous consolidation, the time is ripe for smaller, independent brokers to come into their own and grab market share.

“Clients always want excellent service levels,” he says. “For us, the most important client is our existing client, not the next one. That has always held us in good stead and will continue to do so in the future.”

“We have no reason to copy what others do—that space is overcrowded anyway. Our opportunity exists in niche, specialist lines. We have a very different view of the world and the relationship we want with our clients,” he says.

Finch adds that the areas Lockton Re specialises in are well suited to innovation. He says that long-tail and specialty business have not been immune to rate decreases and pricing pressure, largely because reinsurers are constantly looking to diversify their product offering.

“We spend a lot of time developing innovative solutions for our clients. The key is having the right experts and truly understanding the risk,” he says.

“All classes of business have certain nuances but with speciality lines in particular, you need a broker who knows what they are doing and can spend more time on the risk.”

Mark Waterkeyn is a partner at Lockton Re. He can be contacted at: mark.waterkeyn@uk.lockton.com
Mark Finch is international business development executive, Lockton Re. He can be contacted at: mark.finch@uk.lockton.com