“Based on our January 1 renewals, we see positive indications of rate stability or increases in most lines of business, with significant price increases in loss-affected areas.”


of 2012. In this market environment, we seek to optimise our risk- adjusted return by achieving a better balance in our portfolio between risk and return.


“This means focusing on those sections of the catastrophe portfolio


that offer better returns relative to capital consumed as well as expanding profitable non-cat lines, which we started to do at the January 1 renewals.


“We do have to be mindful, however, that while our margin on required


capital is improving, ROEs on attributed capital are adversely affected by lower interest rates. For a portfolio with the risk profile we target, priced ROEs in the current environment are likely to be more in the 9 percent to 10 percent range, rather than closer to our long-term target of 13 percent.”


PLATINUM UNDERWRITERS 2011


Gross premiums written


Net premiums written


Net income 689 651.5 -224


Combined ratio 143% (Claims ratio: 116.8%, Expense ratio: 26.2%)


Return on average common equity


-11.8%


2010 780


761 215.5


86% (Claims ratio: 59.9%, Expense ratio: 26.1%)


10.4%


RENAISSANCE RE 2011


Gross premiums written


Net premiums written


Net income 1,435 1,012 -92


2009 925


898 382


76.7% (Claims ratio: 51%, Expense ratio: 25.7%)


21.1% As in any business, it is crucial for reinsurers to write only lines of


business that can provide them with profitable returns. Sometimes, this requires them to pull back on certain lines and wait for them to return to profitability, says Ken Kurtzman, Platinum Re’s executive vice president and chief risk officer.


“We believe we are likely to write a similar US catastrophe portfolio


next year, compared with our in-force book,” he says. “However, internationally, where there appears to be less expected margin available, we intend to cut back.


“While we’ve seen some positive movements in casualty rates, we expect insurance and reinsurance capacity in this area to remain abundant for the


Combined ratio 118.6% (Claims ratio: 90.6%, Expense ratio: 28.0%)


Return on average common equity


-5.3%


2010 1,165


849 703


45.1% (Claims ratio: 15.0%, Expense ratio: 30.1%)


16.5%


2009 1,229


838 839


21.2% (Claims ratio: -8.0%, Expense ratio: 29.2%)


27.6% In choppy waters, it is important to keep things on an even keel. This is


the philosophy at RenaissanceRe. “Consistency in a volatile business is key for RenaissanceRe—by that


I mean adopting a consistent, exposure-based approach and having a consistent presence in the market for our clients.” says Neill Currie, RenaissanceRe’s president and chief executive officer.


“Because we focus so much on property catastrophe, targeting high-


severity/low-frequency business, we need to offset that volatility for our investors with appropriate returns. The returns which we expect now are adequate, but they are not as good as the returns that we would be able to offer in a higher interest rate environment.


“In 2011, we sold our admitted US business and I believe that it was


a good move, allowing us to be even more nimble and sharply focused. It helped investors to understand more clearly what we do and don’t do. For example, in the admitted business the focus is typically on expenses and process. As natural catastrophe underwriters, our focus is on being a trusted, long-term partner for our clients, fully understanding the challenges they face, working with them to improve their book of business, paying claims within 48 hours, sharing our research on natural hazards risks, and so on.”


Spring 2012 | INTELLIGENT INSURER | 23


rest of 2012, constraining the potential for significant improvements. It will be some time before sustained rate increases are going to make treaties that we have previously rejected look appealing to us again. If rate increases continue at this level, our casualty volume could stabilise. If rates increase even further, we will grow the book, as we did from 2002 to 2005.”


The company also remains in a strong position thanks to its corporate


structure. Kurtzman says it holds more capital than required by the rating agencies to achieve its ratings of A from AM Best and A- from Standard & Poor’s. This means it has the financial flexibility to expand its underwriting, hold riskier assets, or buy back shares, he explains.


“Our decision making will be guided by the pricing we observe in the various markets.”


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