Not only is Montross clear that the industry now needs stability more than
anything, he also argues that the long-term benefits of some of the most fundamental shifts are not necessarily clear and bemoans the costs associated with them. “Regulatory changes are requiring large investments of both time and money to be compliant. Yet it is not clear that a greater emphasis on quantitative models will improve risk management for the industry,” he says.
Another important trend he predicts is that the role of brokers will
change in the coming years. “The role of the broker will continue to evolve, ultimately becoming that of a risk consultant paid on a fee-for- services basis. There will be continued consolidation in the broker market segment and I think ultimately fewer reinsurance markets,” he says.
This view is also interesting when taken in the context that he regards his
“The products, exposures and wrappers may change, but the fundamental principles of risk underwriting and risk management always apply.”
proudest achievement since undertaking his role at Gen Re as maintaining the company’s commitment to a direct business model. “This makes us different and underscores our unique value proposition for clients,” he says. “We will work hard to earn opportunities with clients and prospects in a competitive market. In a world dominated by three brokers, we offer an alternative, a different perspective, a choice.”
Montross also expresses some unconventional views about the future
strategy of reinsurers in the future. For many years, diversification has been the watchword of the industry—both in terms of geographical reach and product range. Rating agencies rewarded it; investors looked favourably upon it. It could protect against sharp local market cycles and trends, and position companies well to take advantage of opportunities wherever they might emerge, it was thought.
But the Gen Re chief believes that these theories are no longer valid.
“Diversification as a strategy has been discredited,” he says. “Also, the mismatch between investors’ 18 to 36-month time horizons and their subsequent ‘exit strategies’ will increasingly be seen as incompatible with a business which has liabilities that will be around for many years, if not decades.”
Yet for all the uncertainty surrounding the industry and its future
direction, he also admits that some of the apparent challenges also present opportunities. “Greater uncertainty, changing cat models, increasing cat exposures and regulatory change could increase demand for reinsurance,” he says.
He adds that it will be the reinsurers that allow innovation to flourish
that will be best positioned to take advantage of this. “Innovation in the risk assumption business is about doing things smarter and more efficiently, while maintaining a keen focus on risk management,” he says. “The products, exposures and wrappers may change, but the fundamental principles of risk underwriting and risk management always apply.”
Montross says he gears his own approach in terms of how he runs the
business to ensure this happens by getting the best from his people. He wants everyone to contribute to concise company goals. “I’ve tried to nurture a more collaborative culture, but with crystal clear objectives. I want our people to believe in and live our strategy—not just follow it,” he says.
16 | INTELLIGENT INSURER | November 2011
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