September 2014 20 Bermuda:Re/insurance+ILS


MORRISON: Everyone is striving to retain primary books of business, recognising that to attain revenue numbers they need to retain more risk. On the reinsurance side the competition is coming from convergence capital.


Reinsurers are responding to traditional players increasing their


retentions and to the influx of convergence capacity by dropping rates and easing terms and conditions. There is some recognition that this situation is not sustainable and many reinsurers are waiting for the next big loss to bring about a realignment within the market.


THRESH: Unless you are one of the bigger players that can almost dictate the market, conditions are proving tough. Smaller players have come under the most pressure, particularly in the more commoditised segments of the market such as property cat. It will prove a challenge for them to unlock demand in the face of competitive dynamics.


PINCHIN: In mature markets buyers are more capable of retaining risk, due to stronger capital positions and greater buying sophistication. However, the reinsurance product for many has not changed for many years and there is huge scope for tailoring more effective, efficient coverage. Hiscox believes we can add real value by understanding our clients’ needs and developing products to meet those needs—not simply by selling more of the same.


We have an active product group which has generated numerous


ideas and solutions for our clients. Products such as sideways cover for attritional risk excess losses and a cost-effective drop-down cat layer protection are examples of products developed in response to issues that clients have told us are real problems. It is through dialogue arising from discussion on such products that we better understand our clients’ needs and can add greater value through product design.


Reinsurance need not be the blunt instrument it is for many; it should flex to fit specific client needs and our underwriters have the expertise to deliver that level of innovation and customisation.


COOPER: No, it definitely isn’t a fact of life—and I would point to a number of factors that support that fact. In June we saw a lot of Florida companies buying more reinsurance. For the companies that we support in the state we saw more than $1 billion of additional demand for limit. People in Florida are using some of the money they have saved from the deteriorating rate environment and putting that to work buying additional limit.


Part of the reason you are seeing decreased demand in some lines


of reinsurance is the underlying balance sheet strength of a lot of the large commercial insurers. Right now they are very well capitalised, but clearly that can change because of weather, earthquakes, adverse loss results and investment conditions. When conditions change, it will change people’s need for reinsurance.


EVERETT COLLECTION / SHUTTERSTOCK.COM


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