Lockton's Lumelleau Views Hard Market Signals as Aberration

Tracking the migration of quality executives among insurers and monitoring the quality of market capacity are among the industry challenges that Lockton President and Chief Executive John Lumelleau sees looming in "perennial soft market conditions."

Lumelleau, who is in Boston for the Risk and Insurance Management Society's annual conference, told BestWire that any signs of market hardening look like an aberration as the soft market marks a six-year run. Pockets of hardening have taken place, but he said the mood, climate and pricing remain soft.

"We see a continuation of the market conditions as they exist today into the foreseeable future," Lumelleau said.

As for capacity, Lumelleau cited the need to make sure that all key trading partners are identified by Lockton "so that our clients' best interests are preserved at all costs." Underwriting stability is another underlying issue.

Lumelleau said insurers have taken steps to strengthen certain lines with regard to rating and exposure, but that general market conditions remain soft. Global economic conditions and the underpinnings of the U.S economy have not helped the client base develop business volume.

"You really have a situation that has developed over a number of years which makes it difficult for a hard market to emerge," he said.

Lumelleau said he expects insurers will focus their attention at RIMS on developing new opportunity, whether that involves new segments where they have no placements, or finding ways to add value in existing lines.

Lockton reported record revenues of $787 million for 2009, a 6% increase from 2008. Lockton is the eighth-largest broker by 2008 brokerage revenue, according to Best's Review's Top Global Brokers ranking.

More specific opportunities for Lockton and other brokers will result from health care reform and what Lumelleau called a need to add "clarity." He said a learning period was triggered when the Patient Protection and Affordable Care Act was enacted, and that Lockton's health reform advisory practice, which was formed less than six months ago, was positioned to capitalize on the pending opportunity. Smaller brokers may be hard pressed to keep pace in the run-up to 2014, when the full force of the law kicks in. He said it could spur merger and acquisition activity in the small broker space.

"It will be a challenge for some of the brokers and agents to keep up with the information development and the quality of what they are able to share with their clients, just because of the mammoth amount of activity it will take to instrumental in educating our clients going forward," he said.

Lumelleau also said Lockton will continue to capitalize on geographic opportunities, such as in Asia and South America.

"We certainly think there are opportunities to expand the value and depth of the advice that we offer to clients," Lumelleau said.