September 2014 Bermuda:Re/insurance+ILS 17


more specialty business which typically yields better margins. In doing so, we are building a portfolio that is diversified across lines of business and offers our clients multi-line capabilities. We have sought to differentiate ourselves in the market by selecting the best risks and clients and building strong relationships with those clients over time.


MATT WILKEN: Strategies vary, but fundamentally we see four specific directions. The first is growth through diversification. Capital optimisation by leveraging the balance sheet with risks that are accretive to profit without adding additional exposure to the capital intensive accumulations that drive the ‘tail’.


Second is the deployment of capital on behalf of third parties by using multiple mechanisms, eg, traditional reinsurances (ie, structured quota shares), sidecar vehicles, or separately capitalised independent fund-based structures.


Third is the pursuit of scale in order to protect and increase client retention and reduce expense ratios.


Last is the development of innovative products/mechanisms that enable our clients to better manage and protect their underlying portfolios from a multitude of both natural and non-natural risks over the course of multiple years.


MIKE MORRISON: Returns are actually still stacking up pretty well in most lines because of the lack of losses over the past 24 months. Notwithstanding real downward pressure on rates, bottom line returns are reasonably healthy even if people agree that this is not sustainable given that events will occur. That said, we have seen real discipline from players who have seen their top lines come under pressure, typified by an unwillingness to write lines that are loss-making.


If this cycle continues re/insurers will have to reduce expenses, because this is about the only lever they have. Everyone is on the look-out for new business—with some Bermuda players buying diversifying entities—all seeking a sustainable return on capital through less volatile lines.


“We have sought to differentiate ourselves in the market by selecting


the best risks and clients and building strong relationships with those clients over time.” Jerome Faure


CHARLIE THRESH: Companies have been using prior year releases to prop up current year earnings, but there are signs that these are starting to run out. Adverse loss development from prior events is eroding the ability to boost current earnings, exerting added pressure on returns.


Different business models that work harder on the asset management


side are also being explored. It is not necessarily a new strategy, but both the larger and more established players and new entrants are looking to get more creative in their asset allocations.


Are increasing insurer retentions now a fact of life, or can reinsurers unlock demand?


FAURE: It is a true statement on a broad basis. Insurers have been retaining more risk over the past few quarters, but it is not a uniform


YANLEV / SHUTTERSTOCK.COM


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