there can be a conflict if one does not take priority over the other. We need to be careful about whether we want to go down the road of just fee income, because you lose credibility at some point with your clients, your owners and shareholders, and if you’re going to go far down that road you really need to have a serious chat with your shareholders and say ‘we’re doing this’.
Are all Association of Bermuda Insurers and Reinsurers (ABIR) members getting into the third party space and how actively? How does a comparison between a very diversified approach versus a more mono-line approach stack up within the ABIR membership?
Madeiros: What we’ve seen over the last 18 to 24 months is really an embracing of third party capital. There were concerns expressed about the future role of traditional reinsurance in the past, but I think this has been put to bed—there’s always going to be a significant role for traditional reinsurance.
Regarding the question about diversification versus mono-line, companies have had to look at their own individual strategies and their global platforms and how they’re operating to make the determination of what is best for them. There are still some groups who are pretty much mono-line, but that is probably the exception rather than the rule across our membership. Part of that plays into where they have developed their expertise and there are some whose client base look to that.
If you had asked me two or three years ago would our market look the way it does today, I would have laughed out loud because at one point it seemed like it was going to go down two separate paths, but what we’ve seen is that the roads have joined. Depending on where the global investment market heads in the next year or two, that road may stay together or separate again.
People are not just looking at the demands of their clients and shareholders—again we return to regulatory capital requirements. We see the International Association of Insurance Supervisors is now developing an international insurance capital standard that was unheard of in the past.
Similar to what exists under Basel III for the banks, they’re now thinking about developing and actually field testing parameters around what global insurance groups are going to have to hold in terms of capital, so as these discussions go on we’re going to see additional thinking and strategising about capital deployment.
How are reinsurers looking to drive value in the insurer- reinsurer relationship, particularly in light of shrinking panels, rising retentions and increased competition?
Few: We’ve been referring to this as the battle of the signings, and there is definitely a consolidation of panels in the industry. It varies by product and region, but as a general statement buyers are choosing to deal with fewer bigger reinsurers. The means to make sure you’re relevant are multiple.
First and foremost, it’s advantageous to be selling more than one product to the customer, which is another benefit of diversification. You’ve also need a certain amount of capacity to be big enough to be in the game— that comes down to your ability to access all forms of capital. You also have to be innovative with products in order to keep up with what buyers really want.
Reinsurers are going to be more successful if they work harder to get the business and draw closer to the customer, opening up new hubs to source the business. There is a general trend in the industry that buyers will buy as locally as they can and there’s a lot of reinsurance business which can now be traded in local markets that doesn’t need the capacity and expertise of Bermuda or London because it’s being provided in Zurich, Singapore or Miami. Most successful reinsurers have realised this and have moved closer to the risk.
Berry: It is also worth considering the rising tide of new risks and how as an industry we can remain relevant in taking on these new areas of risk where we don’t have decades of data to work with. We have to rely more on predictive analytics and where I see the industry developing its value proposition is as the purveyors of risk solutions.
17 Bermuda Finance | 2014
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76