While some reinsurance brokers see opportunities to achieve significant economies of scale in the reinsurance market through acquisitions, others see opportunities to grow by providing reinsurance buyers with more choice in a distribution market with fewer players.

Last year’s merger of reinsurance brokers Guy Carpenter and JLT Re, as part of the acquisition by Marsh & McLennan Cos. of Jardine Lloyd Thompson, secured Guy Carpenter’s position among the top three along with Aon Reinsurance Solutions and Willis Re.

Now, the pending acquisition by Aon of Willis Towers Watson, which includes Willis Re, is expected to drive Aon Reinsurance Solutions to the top. The result will be two, not three, very large brokers with size and clout greatly exceeding those of any other competitors.

Last fall after the Marsh-JLT deal and before the Aon-Willis announcement, Robert Hartwig, an apparently prescient professor and insurance industry expert at the University of South Carolina’s Darla Moore School of Business, told Carrier Management that consolidation of intermediaries has been going on for a while and was likely not done. But he questioned if it’s good for insurance carriers. (See Russ Banham’s, The Aftershocks of the Guy Carpenter-JLT Re Alignment.)

“These deals are driven by economies of scale and the cost reduction this produces, which is good news for the reinsurance brokers involved,” said Hartwig. “But for carriers it reduces the opportunities to shop around their business to get the best possible deals in a growing global reinsurance market.”

Hartwig said that even though the reinsurance market has plenty of competitors and capital, “all this business now has to go through a narrowing bottleneck because of fewer reinsurance brokers. As an economist, I can unequivocally state that this is bad for competition.”

For their part, the big reinsurance brokers may be better positioned to deliver value-added services as well as help insurance carriers that are themselves getting bigger.

On the way to achieving their desired economies of scale, the big two have lost some of their talent to competitors that are hoping to rise up in the rankings by providing buyers with an alternative to the big two.

Lockton Re is among the reinsurance brokers hoping to seize the moment. Among those leading Lockton Re’s efforts are Tim Gardner and Ross Howard, both well known in reinsurance circles.

Gardner is global chief executive officer of Lockton Re, which he joined in March, 2019 after 20 years with Marsh & McLennan, where he was chief executive officer for North American operations for Guy Carpenter. Before that, Gardner served as head of international sales for Marsh and was global leader of the Marsh risk management segment. He has also held several other positions at Guy Carpenter including global sales leader and global property specialty leader.

Howard, now global chairman at Lockton Re, is the former executive chairman of JLT Re, as well as a past vice chairman of Guy Carpenter following the acquisition of JLT by MMC. As global chairman of Lockton Re, Howard is focusing on Lockton Re’s North American and London-based operations, working will work alongside Global CEO Gardner and Keith Harrison, CEO of Lockton Re International (also formerly with Guy Carpenter).

Lockton Re has hired a number of other reinsurance specialists from JLT and Guy Carpenter including Claude Yoder, formerly managing director and global chief innovation and product development officer for Guy Carpenter; and Nicholas Durant, a former managing director for Guy Carpenter. Others include Charles Raw, Tim Jacobs, Derek Keating, Fraser Howard and Mark Higgins.

In a recent Carrier Management interview, Gardner and Howard shared the vision of where Lockton Re is headed and how it plans on achieving this vision.

“[W]e feel like there is a really compelling case for new entrance in just a broad sense for the market yearning for choice and optionality,” said Gardner.

“[T]he choice for clients is getting smaller and smaller. This venture started well before the Aon Willis operation. It was set to bring in the right people who can actually grow a business by servicing plans and making sure that all their insurance needs are looked after. And we believe that all the hirings we’ve done so far, very much follow that pattern,” Howard said.

They believe that in addition to their talent, their data and analytics capabilities will allow them to distinguish Lockton Re in the marketplace.

“What’s important to us is that when we offer the services to clients, that we can back that up with the analytics that we’re offering and providing, the claim service, and all the other things that we need to do to set us apart from our major competitors,” said Howard.

While the Lockton agency is well established, Gardner said Lockton Re is like a start-up in some ways. “We aren’t encumbered by old legacy systems. And so our ability to innovate and bring new technology and capabilities to the market is really compelling. And frankly it’s pretty quick,” he said.

They are also looking to leverage the existing relationships Lockton has as the largest privately-held independent agency.

“We want to offer a relationship with Lockton that has a retail relationship and a reinsurance relationship. And while the two can’t be connected, the relationship can be connected. And so our goals to get to the level that we want to get to, are very much based on working together as a business,” said Howard.

To view the excerpt from Carrier Management interview with Gardner and Howard on how they view today’s hard market and pandemic, visit here: Lockton Re Execs Explain How This Hard Market Differs From Others.

To view the excerpt from Carrier Management interview with Gardner and Howard on how they are reimagining Lockton Re, visit here: Lockton Re Imagined: Bringing Choice to Reinsurance Brokerage.

To view the complete interview in which they also share their views on Lockton Re, today’s reinsurance market, the pandemic and more, visit here: Lockton Re: Leveraging Talent, Analytics and Relationships in Reinsurance Brokerage.