News


urich is placing an increased emphasis on fine-tuning its reinsurance-buying


process in order to achieve the best value, Markus Meier, Zurich’s head of insurance management, told Baden-Baden Today. “We endeavour to create more efficiency


21.10.14 TUESDAY


Zurich reduces its reinsurance partners Z


in what we’re doing,” he said. “At the same time it’s important that we really strive for a partnership with those companies that have been on our panel for years.” As part of this process, Meier said, the


insurer has started to reduce the number of players on its reinsurance programme in order to achieve greater efficiency and simplicity. “If you have fewer reinsurance partners,


you have fewer statements of accounts, so the administrative part can get leaner,” he said. He added that Zurich is not an opportunistic


buyer. While some brokers and reinsurance companies suggest ceding companies should buy more reinsurance in order to offload some


Markus Meier


of the volatility on their balance sheets, Zurich’s philosophy is that if you have business that is losing money, you cannot make it profitable through reinsurance. “That’s why the original underwriting—


the gross underwriting—is key. If you get that right, then you get a decent margin and you can retain it, within a certain risk appetite.


Not all doom and gloom for brokers A


prediction made some five years ago by Guy Carpenter that the majority of


new capital entering the industry would do so via sidecars and through vehicles offering fully collateralised solutions, has been proved correct, Nick Frankland, chief executive officer, EMEA, Guy Carpenter, told Baden-Baden delegates at the reinsurance symposium held on the first day of the event. Introducing the event, which discussed


what the future of the industry might look like, he first turned the clock back and examined where the industry was five years ago. He noted that the period was notable for the rush of reinsurers forming in Zurich, Solvency II was set for implementation by 2013 and BP was trying to plug the Deepwater Horizon oil spill in the Gulf of Mexico. In some ways, Frankland said, little has


changed in the industry since then. Eight of the top 10 reinsurers back then are still top 10 players and the five biggest reinsurers remain unchanged. “Equally, the rating agencies predicted there would be no new entrants—the barriers seemed too high,” he said. “That has not panned out.” But in terms of industry trends in recent years, he said, it is starting to feel like


“Reinsurance is a long-term play; that’s why


we are not opportunistically taking advantage of the situation,” Meier said. Speaking of Zurich’s own internal


reinsurance function, he added that the main target is to support the company in achieving efficiency on the capital management side. “Because we act as if we were a third party


external reinsurer, our job is to understand the data much better going forward and to be ready to face challenges in the reinsurance industry as a whole,” he said. He added that it will be vital to stay alert to


new developments within the industry. These could potentially


include new distribution


channels if companies such as Google decide to start selling policies, and changes to the type of cover required for long-standing lines such as motor, which may be set to shift away from driver liability towards product liability with the predicted advent of driverless cars. n


Groundhog Day at conferences such as the Monte Carlo Rendez-Vous. “The themes are still excessive capacity, low


cat losses and insufficient demand—as well as how to cope when the Hotel De Paris is closed in 2015,” he joked. He said the percentage


of the market


being taken by so-called alternative capacity is increasing: 16 percent of global property- catastrophe capacity, up from 14 percent the year before. This compares with just 8 percent in 2008. “The cat bond market is very significant


now. Investor demand is strong and we have seen a number of firsts in this market, including the first issuance in Japanese yen and a deal by the New York Metropolitan Transportation Authority, which bypassed the traditional markets completely.” On top of this, Frankland said, the big insurance groups are optimising their balance sheets and rationalising their strategies. This means increased retentions and spending less with smaller numbers of larger reinsurers. “We also have relentless price decreases in


most lines. If the pricing trend is examined on a historical basis, the cycle seems to be flattening.


8 | BADEN-BADEN TODAY | DAY 2: Tuesday October 21 2014 Nick Frankland


The peaks are lower and shorter meaning the potential payback period for the industry is decreasing as well.” Against


this picture of a challenging


landscape for reinsurers, he concluded that it was not all doom and gloom for brokers. “We must become experts in all methods of risk transfer and advise clients on all the options available to them, while also working to stimulate demand and design solutions,” he said. n


www.intelligentinsurer.com | www.bermudareinsurancemagazine.com


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