Privately-owned Lockton Re is reaping the rewards of offering a real alternative

As consolidation reduces the choice of reinsurance brokers, privately-owned Lockton is reaping the rewards of offering a real alternative and is enjoying strong growth as a result, the firm’s Mark Waterkeyn tells Baden-Baden Today.

Against a background of consolidation and the many other pressures facing reinsurance brokers, Lockton Re has enjoyed rapid growth in recent years, something Mark Waterkeyn, a partner at the firm, attributes to the company’s flexible and nimble culture, its client-focused ethos and its constant investment in expertise.

Lockton Re enjoyed growth of around 18 percent in its last financial year, which ended in April, and similar levels of growth are expected this year. He argued that the fact it is privately owned means it is more protected from the industry forces that buffet its rivals, such as constant speculation about consolidation and shareholder scrutiny of quarterly earnings.

“It has been a good growth story for us for several years,” Waterkeyn said. “We have increased our headcount, the number of classes of business we offer and our overall income. We provide more choice for clients but also stability.

“We are an independent, family-owned business that was first established in the 1960s and we represent a very reliable and credible alternative for clients.

“We view consolidation as helpful to us, although not for the market as a whole in terms of client choice. But we can’t change the economics of the market—it is what it is.”

Lockton Re’s growth has been driven by a solid foundation and class expertise in long-tail casualty business, financial lines, motor and other more niche lines. It has also hired a number of actuaries in the past 12 months; boosted its marine and energy team, hiring Jerry Ridge from Willis Re; and added personnel to its trade credit and political risk units.

“Our strategy has always been to start with the expertise and build out from that; we believe this has been key to our success,” Waterkeyn said.

“We also tend to build out from the areas where Lockton has enjoyed growth; once we are established on the direct side, we then start to build out the reinsurance operations.

“It is about acquiring the right talent. We invest heavily in recruiting good graduates as well as cherry-picking the best experienced people who are seeking a new challenge within a different kind of company.”

He added that good class knowledge is something that some brokers have overlooked in recent years—especially as more business is placed on a multi-line basis.

“We like our brokers to understand the nuances of the lines of business they broker, how they perform and how to correctly price them. You need that in-depth knowledge to do this job well.”

Client service

Lockton Re has also enjoyed some growth internationally. Waterkeyn said China and South America have been fertile ground for expansion of the broker’s direct operations and the reinsurance business is now starting to do more business on the back of this.

He believes the biggest factor that sets Lockton Re apart is its dedication to very good client service, backed by the support and consistency of the team.

“Our client service is second to none,” he said. “This is partly because we do not outsource any of our functions. Our claims, technical support and accounting are all done in-house—that gives clients a seamless service,” he added.

“Clients come to us because of our service proposition and our team approach. We coordinate all efforts around our customers.”

In terms of what he expects from discussions in Baden-Baden, Waterkeyn said that this will be centred around any loss activity and whether clients are seeking structural changes to their programmes. He sees pricing as largely flat, except in instances where clients have had specific losses on a programme.

“There is still a lot of capacity in the market with many reinsurers still trying to diversify their books of business, and this means there is pressure on rates in all lines,” he said.

He added that it will be interesting to see how some buyers change their programmes. He believes that many buyers have cut their reinsurance programmes back in recent years, but recent heavy losses have convinced some that they need to buy more reinsurance again.

“The recent losses have reminded many buyers of the true value of reinsurance,” he said. “On top of that, Solvency II has made it a more technical process with the link between reinsurance buying and capital utilisation now much better understood.

“This has led, for example, to more purchasing of legacy reserve covers as insurers try to use their capital more efficiently.”

Mark Waterkeyn is a partner at Lockton Re. He can be contacted at:  mark.waterkeyn@uk.lockton.com