News
place to hide The troubled economic conditions, which look likely to impair industry growth, have been the key focus at Baden-Baden.
E
conomic and market turmoil, the low interest rate environment, the ongoing sovereign debt crisis and an uncertain global economic outlook
are together serving to create a perfect storm on the asset side of the business, forcing re/insurers to concentrate on their underwriting with a renewed sense of urgency. That is the view of Jean-Jacques Henchoz, head of EMEA and member
of the group management board at Swiss Re. He says that it needs to ad- dress these concerns with some urgency as the industry faces a “very tough investment environment at present”. Henchoz believes that re/insurers will need to look to diversify – by line and geography – in order to find growth opportunities in the current troubled environment. On the asset management side Henchoz says there is no place to hide.
“Rather, firms need to be conservative in their asset mix and focus instead upon underwriting. In this environment you need to have a bottom-line
26.10.11 WEDNESDAY
Economic uncertainties leave no
mindset,” he says. And while the economic envi-
ronment is troubled, it is equally important to recognise the scale of natural catastrophe losses suf- fered by the industry in 2011, Henchoz says. “This year is the second larg-
Jean-Jacques Henchoz, Swiss Re
est cat event year in recent history. Our Sigma team has put a $75 billion price tag on insured losses for 2011 and the year is not even over. Even if second half losses are in line with average losses, 2011 will be a heavy year.” Nevertheless, Henchoz says there are positives to be drawn from recent
troubles. “In 2011 the reinsurance industry made clear that it had recovered from the financial crisis of 2008 and proved that it has significant resilience. Return on equity will admittedly be poor this year, but the industry has shown that it can absorb some major losses,” he says. Henchoz says that he hopes recent events will trigger a debate on the
increasing severity and frequency of loss events. This would likely pres- ent opportunities for those firms able to satisfy additional demand. And he believes this will have an impact on pricing. “It could mean increased demand for capacity going forward and an end to the price erosion of the past five or six years. It is important that we produce adequate risk- adjusted premiums.” Regulatory developments – Solvency II in particular – is another criti-
cal issue being addressed at Baden-Baden, Henchoz says. “The industry must highlight the specificity of re/insurance compared with the banks,” he says, something he describes as a big concern. “We need the regulators to establish a regulatory framework that takes
into account the long-term sustainability of re/insurance and one that creates a conducive business environment. If you take the gender direc- tive in Europe, for example, it is evident that the functioning of our indus- try is not well understood. We need to play our role in ensuring that it is.” Nevertheless, opportunities will inevitably emerge for reinsurers to
support their primary partners as they look to comply with Solvency II, Henchoz says. “Reinsurers can contribute by helping primary players in their growth strategies, their capital relief solutions and in optimising their capital structures.” Solvency II provides reinsurers with the opportunity to elucidate their offering, he says. Turning to Swiss Re’s ambitions as a business, Henchoz says the com-
pany has “learnt its lessons from the financial crisis on 2008 and has worked hard to rebuild its capital strength”. It is now well positioned and he wants to extend this message to the world. “I want to give a message of continuity to our long-term partners. We believe that we can capably team up with our clients and brokers to address their specific risk and capital needs. Together we can explore growth strategies and we are well-positioned to do this, with clients at the centre of everything we do,” he says.
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