View From the Top:
As soft pricing persists and growth opportunities remain elusive what actions must reinsurers take to remain relevant and drive competitive differentiation in an increasingly crowded market place? A panel of chief executives discussed that and more.
“As soft as you think the market is, in terms of risk, last year was an outstanding year. And prices while they are down, are not down anywhere near their absolute lows,” said Don Kramer, Chairman and Chief Executive Officer, ILS Capital Management. “What we do see, however, is a change that is affecting the reinsurance brokers, because what we are seeing now is lot of insurance linked securities and other kinds of things that are going around the brokerage markets.”
Mr Kramer said there are massive changes coming forward in the entire institutional market.
“But it doesn’t mean the market is over, it doesn’t mean people don’t have to buy reinsurance. It just means we’re going through an interesting period and it requires a lot more analytics than it’s had before - as to diversification and portfolio analysis in terms of where you write.”
Costas Miranthis, President and Chief Executive Officer, PartnerRe, said the industry is better equipped to deal with tough times.
“I think the reinsurance market today is
far more sophisticated than it was in the late 1990s,” Mr Miranthis said. “Although today you find some reckless players, it is very difficult to find somebody who is
completely irresponsible - people have models, access to better skills, and frankly the quality of the human capital in the industry has improved enormously over last 15 years or so. So some of the excesses and some of the stupid behaviour that you may have seen 15 years ago, I don’t believe it is around today, so that is a change and a change for the better!”
Mr Miranthis continued: “Secondly, I think that the degree of transparency has improved. Fifteen to 20 years ago a lot of the reinsurance capacity was coming from divisions of bigger organisations. A lot of the economics of the reinsurance industry were not particularly transparent to the equity investor. That has changed dramatically over the past ten years particularly as capital has been moving to set up new companies here in Bermuda.”
Jeremy Pinchin, Chief Executive Officer, Hiscox Re, “The changes are quite dramatic. It is always deepest and darkest when you get to the middle of cycle. And it is always very difficult at that time to tell what is truly a long-term change and what is a short-term imbalance.”
He added: “Do I think there is a fundamental change? Yes. We have got access to new capital and mechanisms for it that are set up that we can’t go back
from. How far that goes ... I don’t think I can tell. But certainly as a reinsurance organisation we are used to different capacity providers.”
He concluded: “Yes I think there is a fundamental change with capital coming into the market ... but I think it is too early to tell at this stage whether it’s a full change or not until we see some real tests of the marketplace – with some big losses.”
Mr Wightman said: “There’s no doubt we are in a difficult period structurally and cyclically, but I also think this is forcing executives and other stakeholders in the industry to concentrate on both innovation and developing where the next wave of growth can come from.
“It’s also challenging executives to look at their operating models – what do they want to be? Is it scale, is it building out a richer investment strategy? These are some of the questions that I think are so fundamental to focus on and I know many companies are concentrating on just that very point – what do they want to be in the next two to three years and then over the next decade.”
4 Bermuda Reinsurance Conference 2014
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