Lockton Re’s new capital markets division plans ‘to be as agnostic as possible’ for clients

Following reinsurance broker Lockton Re unveiling its new capital markets division yesterday (11 September 2022), Robert Bisset – the firm’s chairman of global, retrocession and property specialty, Bermuda and market capital – confirmed that the new operation plans to be “as agnostic as possible” for clients.

Addressing trade press at a roundtable briefing at Rendez-Vous de Septembre on 12 September 2022, Bisset professed to be “really excited” about the capital markets initiative, named Lockton Re Capital Markets (LRCM), which will be led by New York-based Zach Breslin.

The remainder of LRCM’s team will be built around Breslin’s leadership, Bisset added. “We’re just waiting to find the right team, right individuals to join us,” he said.

Currently, LRCM is waiting to “get all the proper plumbing and regulatory sign off”, Bisset continued. The division will launch in the US, before subsequently expanding into London and Europe.

The timing of the business launch, meanwhile, has not been influenced by market-wide chatter, the broker confirmed. Instead, LRCM’s launch has been centred around when appropriate staff have been found and hired.

“We know that as a broking firm, we’re a better firm if we have capital markets capabilities,” Bisset emphasised.

Providing options

For Bisset, LRCM is focused on “rounding out our skill set to be as agnostic as possible to the client” by providing a broad range of “capital-based solutions”.

Tim Gardner, Lockton Re’s global chief executive, added: “Our mission is to be very agnostic with clients to say ‘here are the options set in front of you, our recommendation would be X’, a combination of traditional capacity, insurance-linked security capacity, whatever else it might be.

“[LRCM] is not built around [incentivising] us or the client to do one thing or the other – it’s about giving them optionality. So, trying to build [a] structure that supports that view is part of the mission.”

Another facet underpinning LRCM’s creation is that Lockton Re has “structured our capital markets business as not being separate”, noted Keith Harrison, the broker’s international chief executive.

Bisset agreed: “In other broking houses, [capital markets divisions are often their own] silo. When we hired Zach, we wanted to be a reinsurance broker with capital markets expertise. He’s clearly fantastic at his job.”

This mentality is mirrored within Lockton Re’s Bermuda operations, Bisset added, where the whole office pulls together during challenging periods.

Eagle eye on third party capital

As LRCM finds its feet, Bisset said that Lockton Re is “watching third party capital very closely”.

He explained: “Cap ons are a big discussion with clients right now with capital preservation and capital protection - it’s a fantastic tool.

“And then when you cascade down to where third party capital plays in the reinsurance and retro space, it appears to us right now that the third party capital that was involved in the market pre-2017 still feels very good about reinsurance and retro.

“The third party capital that came in around 2017 to now, that may have experienced losses, maybe don’t feel as warm and fuzzy about reinsurance and retro.

“There’s certainly additional third party capital players, whether it’s private equity firms or pension funds or hedge funds.”

As property catastrophe capacity in particular is squeezed, Bisset added that Lockton Re does not “anticipate a lot of capacity coming in between now and 1/1” – however, he feels “it’s an area we see growing post-1/1 2023”.