It is a problem that even cutting-edge technology companies, almost


entirely dependent on innovation for their future survival, still grapple with—some unsuccessfully. So the idea of achieving such a seemingly elusive goal within a large and long-established company operating in a sector viewed as ultra traditional in its culture and values, and extremely resistant to change, would seem folly to many.


Yet that is exactly what Stefan Lippe, the chief executive of Swiss Re,


wants to achieve. It is also a well-documented fact that the pace of change in the world today—and therefore almost all industries and business sectors—is faster than it has ever been and is unlikely to slow down. While change in reinsurance has been protracted compared with many sectors, Lippe is clear that he would rather ensure his company is driving innovation than getting left behind.


“Innovation and an agility that allows us to adapt will be critical qualities


for us as a business going forward,” Lippe says. “We have been through some substantial changes and overcome some challenges in recent years, but at the start of this year, I forced us to take a long hard look in the mirror and ask ourselves where we could improve.


“We have excellent technical knowledge and skills, and many very


clever people. But the danger is that if we are too focused on our own capabilities, we fail to listen to the market. The needs of our clients are changing fast and we have to adapt to suit their needs. The days of having a product that would work for 10 years are over now.


If you can establish


a solution for two years, you are probably doing well. So I have introduced a raft of measures to try to improve our innovation and our ability to be flexible and adapt.”


DEVELOPING DECISION-MAKERS One of the key ways in which Lippe hopes to achieve this is by focusing


on the decision-making process within Swiss Re, especially when it comes to dealing directly with clients. He wants the company’s many talented and intelligent people to focus on engineering solutions to clients’ problems rather than simply giving ‘yes’ or ‘no’ answers. “I don’t want us to be saying ‘no’ to clients,” he says. “I would rather say ‘yes but just not in that way’.”


True leadership in a company of Swiss Re’s scale, however, must reach


beyond simply talking about visions and ideals; it must also be capable of implementing tangible strategies for making these ambitious visions a reality. But Lippe has plenty of tricks up his sleeve and examples of where they have worked.


One of the more headline-grabbing examples is the fact that


more than 50 of the company’s most senior executives, as part of a training programme designed to release and encourage innovation, are being asked to play a specially developed reality computer game that simulates the decision-making processes required to run a big company.


12 | INTELLIGENT INSURER | September 2011


“It takes players through a number of stress tests that analyse their


decision-making capabilities,” Lippe says. “It helps teach them techniques around filtering out irrelevant or false information, how to tackle problems and, ultimately, come up with solutions. That is what we need them to do with clients, and it happens best by delegating authority and tasking small teams with finding innovative solutions to problems.”


Seasoned observers of Swiss Re will note that the company has


always been relatively innovative and open compared with many of its competitors. It has a long track record of introducing new products to the market and was one of the pioneers of the insurance linked securities market, for example, long before most of its competitors even gave this market a second thought.


REINSURANCE ENTREPRENEURS But Lippe wants the company to take the seeds of this culture


of innovation and grow them to a whole new level. He wants entrepreneurialism to flourish throughout the company at every level. As he told investors on a recent conference call to discuss the company’s second-quarter results: “There can be opportunities if we seize them with innovation and entrepreneurial spirit.”


He used by way of an example during that call an extremely innovative longevity securitisation, which the company completed last year. Kortis Capital, completed in December 2010, provides cover to Swiss Re against a divergence in mortality improvements experienced between two selected populations. The bond is based on population data and would trigger in the event there is a large divergence in the mortality improvements experienced between males aged between 75 and 85 in England and Wales and males aged between 55 and 65 in the US.


The global longevity issue is set to become a significant problem as a


result of ageing populations and higher risk awareness. Swiss Re can offer indemnity protection to its pension fund or insurance clients with longevity or mortality exposures, while transactions such as Kortis demonstrate how to support the development of efficient capital market solutions on an indexed basis as a source of future long-term capacity.


The deal was recognised as ‘Deal of the Year’ by The Banker, a global financial publication, in the Structured Finance Europe category of its annual awards. The magazine described the deal as “genuinely innovative and potentially crucial” in the context of ageing Western populations and a growing demand for longevity hedging among pension funds and life insurers.


Lippe says the breakthrough was no accident. The deal came about


because a small team of top people with diverse skills were tasked with finding a solution to this specific problem. They were given three years to do it in; they did it in 18 months.


“We made a conscious decision to free up some of our top talent to work on this,” Lippe explains. “And we made this investment at the height


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