News
Extreme pricing cycles are gone for good
market, because they needed money and it would have been done.” The fact that this hasn’t happened is evi-
dence that the market has changed consider- ably over the last decade and has become far more syndicated, argues Molck-Ude. “There are regional hardenings or harden-
ings in certain lines of business which have had losses and adjustments need to be made,” he says. “But I don’t believe that we will ever see the type of hard market where everything is re- ally hard or a market where everything is really soft again.” Molck-Ude also points out that this situation
Andreas Molck-Ude, New Re T
he era of extremes in terms of pricing cycles has come to an end and reinsurers
will have to get used to more stability, but with lower margins. This is the view of Andreas Molck-Ude,
chief executive of New Re, who points out that even this year’s high losses combined with other factors has not been enough to trigger a hard market. “There is not even the sign of a hardening
market,” he says. “Had this occurred ten years ago, the market would have been completely different; people would have shouted for a hard
has been compounded by not only the excess capital held by the industry but also by addi- tional capital waiting in the wings and ready to be employed if the market did harden. “This means that even if there was a hard-
ening of rates, there is enough capital waiting to immediately quench whatever was causing the market to harden,” he says. “All of us need to adjust our mindset. For
example, we can no longer say that, as soon as there is a big event, the market will harden. That is done with now and we need to get used to working in a very competitive marketplace, where the margins which are achievable are go- ing to be quite thin.”
Correct earnings levels must be found T
here is not one core challenge facing reinsurers but several – all of which must
be dealt with if the industry is to secure a healthy future. This is the opinion of Stephan Ruoff, chief executive
of the new Zurich
branch of Tokio Millennium Re. “One issue is the low interest rate environ-
ment, which is very important to companies writing long-tail business,” he says. “There is a real issue there because pricing depends on the interest rate environment. Another issue is the recognition of the value of reinsurance, with some questioning whether that value is disap- pearing, but I don’t think that this is the case. “Reinsurers need to get their earnings right
but this is an issue that is becoming increasingly difficult. Despite risk models supposedly getting
26.10.11 WEDNESDAY
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better, in what is a changing natural environ- ment you encounter more difficulties when try- ing to get modelling right.” Ruoff also believes reinsurers must main-
tain their underwriting discipline and write technically correct business. “You have to understand the business you
are writing and you cannot create surprises in the long run,” he says. “This is an issue which, if we want to our market to avoid a cyclical trough, we need to address.” In contrast with many in the industry, Ruoff does not believe that price is the main issue for all reinsurers. “It might be for some of the big- ger reinsurance companies, where the price is almost the same for everyone, but not for small- er companies,” he says.
2 | INTELLIGENT INSURER —BADEN-BADEN TODAY | Wednesday October 26 2010
Stephan Ruoff, Tokio Millennium Re
www.intelligentinsurer.com
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