News


uyers will again be looking to reduce costs in the year’s renewals—not necessarily


simply by seeking straight price reductions but, more likely, by tweaking and restructuring their programmes, Darren Redhead, chief executive officer at Kinesis Capital Management, part of the Lancashire Group, believes. Redhead, whose vehicle Kinesis offers fully collateralised


structured, to


solutions cedants, says that buyers have become


increasingly sophisticated in recent years. This means they are more aware of the variety of risk transfer tools available to them and the different ways in which protection might be structured—to both save them money and provide better capital management. “People are still looking to save money and


one of the biggest costs is reinsurance,” he said. “Buyers are much more sophisticated than they were three or four years ago. Most are using alternative structures as a complement to their traditional reinsurance programmes and that is changing the landscape. Especially when you consider the consolidation taking place among traditional players, there is quite a lot to negotiate at the moment.” This greater sophistication is an advantage for


Darren Redhead


Kinesis, Redhead said, as Kinesis now spends less time explaining how a fully collateralised structure works and more time focusing on the deal itself. Whereas a few years ago the nature of how a trust fund works within a collateralised structure would need explaining, now many cedants have preferred providers of trust accounts and understand the nuances in the way they work. “There was a time when some people still


wanted a ‘promise to pay’ in place even in a fully collateralised deal,” he said. “That is not the case now. Most people are very happy dealing with the alternative market.”


13.09.15 SUNDAY


Sophisticated buyers are aware of options B


Redhead added that his experience in


Monte Carlo is slightly different from that of traditional players for another reason: he also needs to update stakeholders on any changes to Kinesis’s own capital suppliers or investors. “I have a different capital structure from


the traditional players and some clients want to know if this has changed at all or if they are likely to pull out, perhaps because of the softer market. It is just another conversation to have while also explaining the products and services we offer and their structure. “I am still a reinsurance underwriter and


beyond that the conversations are pretty similar. There will be customers looking to renegotiate their deals and coverages and seeking different ways we can help them,” he added. “There will be further downward pressure


on rates, I believe, and that will be a topic of conversation across the


conference. Monte


Carlo is really just a scene-setter for the real negotiations. But these face-to-face meetings are, nevertheless, very important as this is still a people business. “Analytics are increasingly important but


risk models can also be a very blunt instrument in certain scenarios.” n


claims in a timely and professional manner despite the most recent convulsions in the global economy—and this will continue. That is the opinion of Robert


Hartwig, president and economist, Insurance Information Institute (III), who said that the economic and financial market instability during the summer of 2015 again demonstrated the resilience of the industry. “The past few months bore witness to what


was but the latest act in the Greek debt drama that began in 2009 and by 2012 had sucked in several other nations around the Eurozone’s periphery,” he said. “Just as Greece’s problems resurfaced in


2015, China, the world’s second largest economy, began to grapple with a sharp economic slowdown and collapse of its stock markets. “These factors alone were sufficient to


Re/insurers will retain strength despite economic instability R


e/insurers demonstrated their ability to continue to underwrite risks and pay


elevate the level of global economic uncertainty, but it was China’s surprise decision in August to devalue


the yuan that sent shockwaves


throughout global financial markets. “The yuan’s devaluation amplified volatility


in the very same markets that were attempting to adjust to the possibility of the US Federal Reserve’s first rate increase since 2006.” But Hartwig said that despite the sharp


intensification of global economic and financial market instability in 2015, global insurers and reinsurers once again demonstrated that their ability to underwrite risks and pay claims was in no way impaired by the most recent upheaval in the global economy. “Their core operating model remained fully


operational, as was the case during the global financial crisis several years ago,” he said. Hartwig added that while the industry will face


further challenges, he believes that the stability and strength of the market will remain intact.


6 | MONTE CARLO TODAY | DAY 1: Sunday September 13 2015 Robert Hartwig “No doubt additional challenges will


abound—the potential exits of Britain from the EU and Greece from the Eurozone, economic weakness in China and interest uncertainty in the US. “That said, the stability and financial strength the global insurance industry will remain intact and poised for growth,” he said. n


of www.intelligentinsurer.com | www.bermudareinsurancemagazine.com


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