strength of the currency in the future, this has certainly been an issue in the past, according to New Re’s Molck-Ude.
“The overall cost of running your operations out of Zurich is very high—if you look at
the development of the Swiss franc against the
European currencies, it has made things worse,” he says. “This is because all of us who are resident here will have only a small
percentage of our business which is Swiss franc-based, the majority being euro, sterling or dollar-based. These have devalued against the Swiss franc by around 30 percent over the last couple of months, which means that our costs have risen because they are incurred in Swiss francs.”
While Zurich can certainly offer a number of opportunities, the recent influx of reinsurers to one location has also led to increased competition for business, and this should mean that reinsurers are realistic about what they expect to achieve—especially if they are starting from scratch, according to Molck-Ude.
“A lot of people are pursuing the same business, which means that there is more competition in Zurich for the same ‘bread and butter’ business,” he says. “So there are question marks over whether people who come here to start from scratch will fulfil their business plans, and even if they do on the premium side, I would put a question mark behind the profitability because there is, of course, an increase in competition for them.”
However, given that costs in many of the world’s other reinsurance hubs
are not exactly cheap, many believe that it is not really an issue. “The issue of cost is not fundamentally different from that in any other
reinsurance hub, especially if you consider senior underwriters, who are internationally mobile anyway,” says Regazzoni.
But overall, most are convinced that Zurich will continue to develop as
a thriving reinsurance hub for many years to come, or certainly as long as the current favourable environment is maintained.
“Zurich is on a growth path at the moment,” says Fosh.” These things can change, depending on the regulatory and legal environment that exists. That environment has to be conducive and currently it is, just like
26 | INTELLIGENT INSURER | October 2011
Bermuda was 10 years ago, and you saw the growth which happened there. People begin to gravitate towards these places where the environment is supportive and conducive, so we see our reinsurance division growing and that will include Zurich.”
Geiger agrees. He says that the current stability in Zurich is a quality
that reinsurers find attractive. “Even though reinsurers deal with the issue of uncertainty on a daily basis, they demand stability when it comes to the regulatory environments in which they operate,” he says. “Capital has become increasingly flexible and we are seeing a number of companies operating a multi-hub strategy, which allows them to shift capital should the regulatory environment in one particular territory become too restrictive.”
Aside from the business aspect, Zurich offers its inhabitants a high
quality of life, making it even more attractive to those who have to move their families there.
“Zurich was ranked second for its standard of living in Mercer’s Quality
of Living 2010 study. Of the 221 cities worldwide which were analysed, three Swiss towns were in the top 10,” says Geiger.
“This is of particular importance to the families of those affected by
relocation. Zurich offers a wide range of first class cultural (Kunsthaus, Tonhalle, Opera) and sports facilities, while other facilities outside the city, such as the KKL Lucerne and numerous ski slopes, are only a short distance away.
“There are several international schools in Zurich, ensuring that their
children’s education is not disrupted. English is spoken widely and the daily commute to work usually takes much less time than in other cities in the world.”
This has led some to speculate as to whether Zurich may have the edge
over reinsurance hubs in the world. Naturally, if people don’t just want to get in, make their money and get out—but actually want to make their home there—then perhaps this may lead to a more sustainable future for Zurich as a hub. Only time will tell.
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