Leaders at Lockton’s dedicated reinsurance division, Lockton Re, have said that they expect to see the reinsurance broker market thin out over the next couple of years, as some players fail to remain competitive.
Speaking during a roundtable discussion at the 2022 RVS event in Monte Carlo this week, Lockton Re Global CEO Tim Gardner noted that the reinsurance broker market is at something of a “high watermark.”
“We will probably sit here this time next year or shortly thereafter, and there will be fewer reinsurance brokers,” he conceded.
Senior figures at Lockton Re joined Gardner at the RVS roundtable to discuss the firm’s new reputation as a ‘challenger broker,’ following a year of impressive growth in terms of headcount and capabilities.
Management noted that Lockton Re had “dramatically” expanded its ranks in a very short period of time thanks to disruptions in the market caused by events such as the collapsed Aon-WTW merger, which resulted in many experienced brokers seeking new opportunities elsewhere.
“We are well ahead of our plans in terms of growth,” Gardner explained. “And that’s in really every facet, so headcount, capability, client count, revenue, etc.”
However, he added that “the quality of the of that growth matters,” and said that his firm is now planning to slow it’s growth drive and focus on building out the capabilities and culture it needs to ensure longevity in a difficult market.
“I don’t mind us all being lumped into this challenge broker bucket, I wear it as a badge of honour to be honest,” Gardner continued. “But there’s revenue and then there’s the quality of that revenue.”
“If you look at the quality of our client set it’s as good as you can ever hope for … We are a relatively selective about who we pursue. And so when we do ultimately have revenue growth and client count growth, it is attached to what we believe are the better operators in the market.”
But as the broker market continues to recover from its recent period of disruption, Lockton Re’s executives remain sceptical about the lifespan of other challenger firms that may not have been so discerning in aspects like culture and client picks.
“Who makes it and why? It’s hard to say necessarily,” Gardner told press at the RVS meeting. “This business is driven by capital … and you could assess that in quantity, so how many hires are they adding, and then obviously the quality of who are they adding. And then there’s revenue trajectory. You can’t go into this business as a generalist. You can’t go into our side of the business without really robust analytical and modelling capabilities. And those are expensive, and it’s hard to get people. But when you get them right, it is the cornerstone of the value that we deliver to our clients.”
“So I think those are the pieces that are going to play out as to who actually has that value proposition in a pointed way,” he concluded.