Lockton Capital Markets has been launched by the largest independent insurance broker of the same name, the first broker-owned capital markets and alternative reinsurance capital unit launch we’ve seen in a while, reflecting a continued desire to converge insurance risks with the capital markets.
Lockton Capital Markets will be based in New York and its role will be to facilitate investment banking and capital markets transactions for clients, focused upon “the convergence between insurance and alternative capital,” the broker said.
It’s no surprise to see an insurance broking group looking to position itself with access to alternative sources of insurance and reinsurance capital, as the future of the market continues to move towards one where sources of capacity are less important than their efficiency.
With access to insurance-linked securities (ILS) backed capital markets capacity becoming a differentiator and a key part of the insurance and reinsurance offering, it stands to reason groups like Lockton will quickly position themselves to be able to offer this to clients and also as a way to earn fees by channeling risk-linked returns coming through their broking books to capital market investors.
Interestingly, Lockton has partnered with Antarctica Capital, a New York-based private equity firm, to launch its Lockton Capital Markets unit, as it clearly understands access to capital is key in offering alternative capital and ILS style solutions to clients.
Lockton has hired a recognised professional to run its new Capital Markets unit, in Vishal Jhaveri, the former head of insurance and pension solutions for the Americas at investment bank Citi. Jhaveri has also led alternative reinsurance capital and insurance solutions teams at Houlihan Lokey, Kohlberg and JP Morgan.
Jhaveri takes on the role of CEO of Lockton Capital Markets and will be tasked with driving the adoption of capital markets solutions across the insurance broking group, making access to the capital markets and ILS forms of capacity available to clients.
Michael Calabrese, who is founder and chairman of Lockton’s Northeast operations, is set to serve as chairman of Lockton Capital Markets.
“We are excited to expand our Lockton platform to serve the expanding market for alternative capital in the insurance industry,” commented David Lockton, Chairman of Lockton, Inc. “We have a strong leader in Vishal Jhaveri to build and guide the team and provide innovative solutions for insurers, corporations, hedge funds and other clients. We look forward to partnering with the innovative structured finance team at Antarctica Capital.”
Andrew Bonita, Managing Director of Antarctica Capital, also said “We believe Lockton Capital Markets will deliver unique access and specialized expertise to clients as the convergence of alternative capital and insurance accelerates. We are pleased to support the growth of this exciting new endeavor.”
“I look forward to the opportunity to recruit and grow this team, build the business and facilitate the confluence of alternative capital and insurance,” explained Jhaveri. “There is a market need for solutions that deliver capital, yield, liability optimization and liquidity. Lockton Capital Markets is well positioned to offer these solutions.”
The company said that Lockton Capital Markets will be focused on providing “niche, high impact solutions for insurers and financial sponsors,” while any securities transactions will be conducted through Gnu Securities LLC, a member FINRA, SIPC.
With Antartica capital having a particular focus on investment programs for long-dated liability holders and Lockton Capital Markets CEO Jhaveri having experience across transactions including hedge fund reinsurance platforms, run-off block sales, sidecar formations, private equity backed insurance M&A, pension risk transfer and other structured finance transactions, the range of offerings could be interesting.
Lockton and Antartica could focus on the longer-dated side of insurance liabilities and run-off investing, which may be more interesting to private equity style investors with a longer-term investment horizon looking for insurance-linked and relatively uncorrelated returns.
Of course Lockton also has a major property book and opening some of this to the capital markets could offer efficiencies for their clients, as well as attractive fee income for Lockton.