Gunther Saacke, Novae Re
We need to get back to basics, says Novae Re
Boosting underwriting performance must be the priority, says Gunther Saacke, chief executive and chief underwriting officer at Novae Re.
Novae Re against a background of unprecedented financial volatility combined with excess capital in the industry?
Q How do you strategically position A Indeed we are experiencing levels of fi- nancial volatility that only those of us
who are lucky enough to have made it to a bib- lical age have seen before in our lives. Com- pounded with a rather gruelling first half year that had high severity events at exceptional fre- quency, managing reinsurance feels like betting against reality. That said, there is evidence the industry is slowly getting back on track and that has much to do with refocusing on the very ba- sics of technical underwriting. There is no longer a reliable hedge on the asset side of the balance sheet: instruments which in the past allowed us to get close to a ‘risk free return’ could be said to provide more of a ‘return free risk’ nowadays. Strategically positioning ourselves against
this background means two things: we need to significantly boost underwriting profitability while more systematically assessing the capital intensities of every line of business in which we are involved. In this sense, Solvency II should help and
not hinder the industry, effectively enabling us to take it to the level at which it should be op- erating anyway. As I said, we need to get back to basics, and
that means technical underwriting, pricing risk correctly and optimising your portfolio, with the view to achieving best possible capital ef- ficiency.
Q Do you feel that Zurich is the reinsurance hub of the future or
rather an overpopulated market place on its way “back to normal”?
A Zurich looks back on a great history and tradition in reinsurance. It is a great
place to live, with an exceptional pool of talent to be found there. Switzerland stands for secu- rity, reliability and yes, innovation too – values
Gunther Saacke, chief executive and chief underwriting officer, Novae Re
that do count in our industry. However, it has become almost fashionable
to set up a Zurich operation, so companies need to ask themselves why they are opening offices there. Some of the new arrivals appear to have an
exclusive strategic focus on the European mar- ket, with substantial capital to back their busi- ness case. From a client’s perspective, however, it will always be of interest whether a reinsurer has their ability to globally diversify the ceded risk. When we created Novae Re it was clear
to us from the outset that we wanted to offer a wide range of products effectively diversified on a global scale. We were able to combine a broad product offering, with in-depth speciality lines expertise and strong client relationships across international markets. The highly diver- sified portfolio Novae Re has built
disciplined assessment and management of ag- gregate exposures around the world. Of course this approach has been put to the
test by the very large market losses in the first half year. What we can say is that the global diversification of our portfolio has proven to ef-
fectively balance these losses.
Q Where does the market go from A There are clear indications that reinsur-
here? ance prices are hardening, and not only
in the areas directly affected by the heavy catas- trophe losses earlier in the year. Whilst none of these events was in itself market changing, enough of the excess capital has been eroded from the industry to help turn the market. This said, we continue to be concerned about the long tail classes, especially the liability covers where the industry is only starting to adapt it- self to the changed environment. Clearly we have seen the bottom of the mar- ket, especially in the commodity areas, and we are now facing the beginning of what is likely to become a steady and continuous hardening of rates, rather than the dramatic hardening of short duration that we have seen twice in the last decade. At Novae Re we are looking forward to tak-
ing the next steps in a market which has hit the bottom of its cycle.
Monday October 24 2011 | INTELLIGENT INSURER —BADEN-BADEN TODAY | 17
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