Bermuda Re/insurance Roundtables
“There is demand for contingent business interruption coverage, but the question is whether that demand is willing to meet the needs of those who will provide such coverage?”
Becker: In emerging markets we would prefer to be closer to the ultimate client in order to have greater visibility of what’s happening in that market. You also have to balance that with the desire of emerging markets to require you to be close to the market. In Brazil you’ve got to have a local reinsurer or you’re screened out of 40 percent of the market. Argentina is passing similar legislation. They have recognised that there’s a lot of capital in our industry and it’s nice to have that capital in their local economy as opposed to exporting it all abroad. In the emerging markets, whether it is your intentional strategy or whether it’s a reaction to where the governmental bodies go, you are going to have to be more local than less.
Driscoll: The biggest challenge with any local office is the ability
to export underwriting culture from the home office to the global office, and to rationalise the underwriting culture with the current capabilities of the market—whether it be data quality, product construct, overall pricing, or how you position yourself.
We’re massively intrigued by Asia and Latin America. We’ve got a presence in both areas. We keep a really tight rein on matters because we have questions about the overall data quality, and about how the
product is sold. They tend to be heavy proportional markets and we’re not a huge fan of proportional business. But they will evolve as they get bigger and as the underlying capital bases of the ceding companies strengthen.Th
ey’ll evolve into a more excess market and we want to be positioned for that. We spend a lot of time trying to export our underwriting culture, our philosophy, our approach to rating business, and it is hard. It is hard for people in the local markets to say ‘no’ more often than they say ‘yes’. But if you can work your way through that, there’s no reason not to have a local presence, but that’s not a small challenge.
Few: Maintaining underwriting standards is key, but with modern
systems reinsurance can be run in a relatively flat manner, so it is achievable. The reason it is better to have the underwriting at the front end is that with better knowledge and service you’re more likely to get the really plum business.
The other challenge is the expense point that Marty brought up.
You can’t replicate every centre of excellence globally. You’ve got to use technology and systems to back up local offices. There isn’t always enough attractive business available in emerging markets to
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