News


25.10.11 TUESDAY


No consensus on fragmented market T


he global reinsurance industry is no longer following a single cycle encompassing all


geographical regions and all business lines – as it has in the past – but is now comprised of several, smaller, cycles that follow specific trends and loss experiences in different places and lines. That was the summary of Costas Maran- this, president and chief


executive of Part-


nerRe, who was one of the speakers at the Guy Carpenter symposium held on Sunday. “There is no one market; there are many,” he said. “The reinsurance market is not a uniform mar- ket; it is geographically dispersed and there are many lines of business.” Maranthis followed Christopher Hitchings, an analyst at Keefe, Bruyette & Woods, who claimed (as featured in Monday’s newsletter) that rates in the industry had not declined as much as many perceive and, as such, an upturn in rates was unlikely. The PartnerRe boss disagreed with this. He


argued that, while the reductions had not been dramatic, overall the market had softened in recent years. “Generally over the last three to four years it has felt as if we are on downward


slope,” he said. “Certainly on a risk-adjusted basis, prices


are coming down. Granted, when we have had losses, we have seen a reaction, but it has been very sectional. Overall, unless there has been a loss, prices are eroding.” In terms of his expectations for the coming


renewals, Maranthis predicted some complex forces at work making it tough to predict what will happen. “We are likely to witness some very com-


plex dynamics,” he said. “While there will be demand, and capital to meet that demand, I am not sure whether all of that capital will be put to work. The psychological approach to risk has changed and the number of alternatives to reinsurance available is something that we have not seen in the past.” Other speakers predicted rates would rise.


Frank Majors, managing principal of Nephila Capital, told the symposium he was anticipat- ing increases. “We expect prices to probably go up,” he said. “But we have not been talking to our investors about rates going up or down but, rather, whether they are sufficient and whether


A fragmented industry in which reinsurers no longer drive pricing – there was no consensus on the direction of rates at Guy Carpenter’s symposium


a particular asset class fits their portfolio in the current rate environment.” But despite his comparatively positive view


on rates, Majors said the demand for risk fi- nancing wasn’t being met efficiently by the in- dustry. “The reinsurance industry handles new risk


very well but we see a lot of unfulfilled demand, suggesting that the business model is not financ- ing the peak risks very efficiently,” he said. The final speaker at the event was Clement


Booth, member of the board of management of Allianz for global insurance lines and Anglo mar- kets, who represented cedants and the primary market. Booth said he believed the direction of the market could be attributed to the actions of the primary insurers, rather than reinsurers. “The shape of the market today is being


driven by insurers, not reinsurers,” he said. “It is a curious market in that sense, because re- insurance companies have played a relatively small role in shaping it as it now stands.” Booth also claimed that the trend of insur-


ers retaining more risk means that reinsurers also have a diminishing influence on pricing.


Costas Maranthis, PartnerRe


Frank Majors, Nephila Capital


Clement Booth, Allianz


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20