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.”

The most compelling opportunity was to develop a unique product liability structure to meet the needs of diverse company’s holdings. Prior to Lockton’s involvement, one division was not able to secure product liability coverage due to their product class and associated catastrophe exposures. Other divisions purchased and managed programs independently. Additionally, the company had divisions headquartered in Europe and Asia, but no control of the insurance placements and no overlying excess program.

To address risk management issues, Lockton identified a creative underwriter, engaged the product liability defense counsel in a marketing effort, and developed credible loss data to support a unique product liability risk financing structure. Lockton not only placed coverage when none had existed, we developed a program structure that mirrored the company’s corporate risk profile along with the unique objectives of each subsidiary. Lockton ultimately created a single global casualty program providing consistent coverage across the enterprise.

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.

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.

A longstanding senior living client experienced great success during the previous ten years and expanded to twice its size. Unfortunately, the economic downturn, increasing expenses, and growing pains created new problems. The client was unsure if the existing insurance plan could continue to suit the company’s needs. Lockton recommended that before doing an RFP, they should go through a strategic engagement process to better understand how risk management fit into the overall corporate goals. The Lockton team and client executives joined to go through the information Lockton had collected and reviewed every angle of the program. The client learned about their current situation, the areas for growth, and developed a future strategy.

A large electric utility company needed a new approach to risk management. Lockton provided a full analysis and devised a more effective way to manage their program. Lockton focused on fostering carrier relationships and restructuring the policy to better cover the tough risks such as landfill gas. Overall, Lockton saved the client more than one million dollars and kept the client aware of all steps throughout the process.

The risk manager of a large heavy construction and fabrication company needed to quantify the performance of their risk management program and increase overall efficiency. Based on behavioral safety and productivity observation, Lockton developed and implemented a job planning process for the client. The new changes reduced incurred claims costs from $1.37 per man hour to $.17 per man hour. It improved bid competitiveness due to $1.20 cost per man hour reduction in labor costs and improved the experience modifier from .90 to .42. The client also reduced payroll expenses by $30 million by improving the productivity 10 percent.

A large construction and fabrication client of Lockton wanted to buy a large competitor. Lockton worked with the client to develop and implement many improvement processes. The client saw an immediate reduction in injuries. The acquisition was blended into the client’s operations with no increase in claims costs per man-hour. Overall, the changes eliminated the potential annual recurring cost of $6 million in accident costs each year and netted $30 million over five years in accident cost reduction.