One of our new clients thought they had a good deal from their casualty insurer when they had provided them with a “roll-over” renewal that--for the first time in nine years--didn't require the company to post additional collateral. They asked Lockton to look deeper, and we found major savings. Lockton helped this major consumer goods manufacturer free up $12 million in collateral. In addition, negotiations led to the return of $1.2 million in cash and reduced premiums by 20 percent while keeping the same retentions, policy limits and coverage. Said the company treasurer, “Lockton has done more in the past month than our other broker did in the past two years.”

Lockton has served a nationally recognized food company for several years now, and has helped the client through many changes.  In 2003, after the company was sold to a private equity firm, Lockton attacked a massive backlog of workers’ compensation claims, closing more than 200 open claims.  In the process, about $4.5 million was freed up for the client.  The client was sold to another private equity firm a few years later, which saw the company scale back its operations.  Lockton helped them through a staff downsizing, showing the company how to properly handle exit interviews.  This training kept fraudulent workers’ compensation claims to a minimum.  In addition, Lockton’s assistance during the past several years has seen a $530,000 reduction in a letter of credit for the client.  The client’s total cost of risk for 2007-2008 dropped more than $2 million from 2005-2006.

A private equity firm purchased a struggling division (SpinCo) of a conglomerate.  The firm immediately employed a prepackaged bankruptcy strategy to mitigate the debt and contractual obligations of SpinCo. The private equity firm’s broker told them that SpinCo’s new casualty program would require significant premium and $15 million in collateral, prompting the call to Lockton. SpinCo needed a stand-alone property, casualty and executive risk program and coverage in effect prior to entering the pre-packaged bankruptcy. Lockton provided a solution that required zero collateral to be posted and offered a short-term, less expensive guaranteed cost primary casualty program. Lockton’s work allowed the private equity firm to mitigate some of SpinCo’s pre-petition liabilities and help the conglomerate unload a non-core asset that was not performing profitably. 

 A Fortune 200 consumer goods company contacted the two largest publicly-held brokers for a required collateral estimate as part of a plan renewal. When the brokers presented estimates of $70 and $65 million increases, the company sought an opinion from Lockton. Unlike the other two brokers, Lockton used the company’s past loss data as the primary diagnostic, and made an initial estimate of a $10 million increase. After being given the broker of record and, thus, being privy to even more of the company’s information and documents, Lockton secured a $5 million collateral increase for the company.

A transportation company earning nearly $900 million annually had a heavily leveraged balance sheet and recognized its inefficient insurance program as an area for improvement. After being asked to intervene, Lockton found areas of collateral redundancy and various premium components that required revision. Lockton met with the company’s insurer to review the analysis and reach a consensus on the collateral reductions, in addition to negotiating a lower premium that retained many of the existing terms and conditions intact. In exactly 30 days Lockton delivered a net reduction in collateral of $20.2 million and a premium savings of $6.3 million.

A large food processor and distributor faced lending restrictions that prevented it from using certain assets in its captive. After renewing the lender’s contract, Lockton investigated ways to put the assets to work. The bank agreed to Lockton’s proposal, but with a high lender’s fee and a letter of credit for far less than the assets’ face value. Lockton identified an alternative bank with a much lower lender’s fee and a letter of credit much closer to the assets’ value. This maximized the company’s borrowing capacity by $61 million while lowering its annual lender’s fees by $2.2 million.

A Fortune 500 food distributor faced a spike in auto liability claims after three losses exceeding $5 million during a 10-year period. This caused the carrier to seek an increase in collateral. One actuary estimated a $40-50 million increase in collateral compared to previous estimates. Unsatisfied with the result, the company, with additional Lockton support and input, partnered with an actuary who had a better understanding of their risk profile and saw the opportunity for a decrease in collateral. At the time of renewal, the carrier’s actuary requested an increase of $20 million in collateral, despite Lockton and company actuaries seeing a need for a $3-5 million decrease. Lockton facilitated negotiations among the three parties, which led to the decision of no additional collateral needing to be posted.

After reviewing a manufacturing firm’s financials, Lockton found opportunities to improve its captive. Lockton identified several flaws in the program. Lockton proposed a complete rewrite of the program’s structure in addition to an evaluation of potentially unused assets that could be put to work. The restructuring plan returned with better results than initially expected and Lockton uncovered substantial additional unused assets as well. This saved the company $1.5 million in fixed costs and alleviated $55 million of collateral letters of credit.

 A firm had switched to a large deductible worker’s compensation program, and needed to post millions in collateral.  However, the company was concerned that the collateral requirement was too high.  It wanted options to reduce the collateral and the fixed costs on the program.  So Lockton conducted a thorough credit review with the carrier, audited and reconstructed its loss data, and then researched claims development patterns to revise the loss projections.  After considerable discussion and intense review with the carrier, the client secured a 50 percent reduction in collateral, freeing up $10 million on the company’s line of credit for other business uses.And in total, the Lockton team helped the firm save $350,000 in cash on its worker’s compensation program.

Lockton helped a major consumer products manufacturer and marketer properly re-set its claims reserves when the company thought it was over-reserving its excess casualty program. The existing broker served simultaneously as a consulting actuary, and the company faced a balance sheet with a large liability. Lockton’s Risk Management Analytics Team’s reserve reviews confirmed millions in surplus reserves. Following an audit and negotiations, the client released $8 million in reserve surplus to the bottom line.

The trucking industry faces a complicated risk profile, especially in a slow economy. Companies struggle to efficiently utilize borrowing capacity and worker’s compensation claims tend to increase as drivers drive fewer miles. Lockton recommended that a trucking client review its insurance program, and found that the incumbent carrier held $5 million more in collateral than necessary. After a switch to a new carrier, Lockton negotiated a collateral return of more than $2 million from the previous carrier and reduced the premium by 11.4%.

A design-build firm had more than $40 million in collateral posted with its incumbent carrier when Lockton was designated the broker.   The collateral situation was in shambles despite our client’s investment-grade credit profile.  The client had never been told by its prior global broker that paid loss credit was deserved.  No broker had ever produced analysis substantiating the collateral need.  Furthermore, the carrier was holding excess collateral due to a dispute about outstanding audits.  Lockton dug in, immediately involving key decision-makers from the carrier (some of whom the client had not spoken to in years) and beginning work to bring the account back to market-efficient level.  Eventually, after number of meetings, phone calls, and analyses, the tireless efforts bore fruit.  Despite the additional exposure of adding another year to the program, the client saw a collateral return of nearly $15 million at their next renewal.

One of the largest providers of healthcare staffing in the U.S. needed to restructure its medical malpractice coverage while reducing collateral and fees. Lockton created a favorable collateral review by changing the client's program structure. The new policy featured a lower limit that reduced the carrier's credit exposure while still satisfying the client's customers. The client realized a 54 percent reduction in fronting fees and a $23.4 million collateral return.