News


(Continued from top of page 1) “That means that


Munich Re seeks to push boundaries of insurability they buy reinsurance


more


centrally, and they buy reinsurance solutions that are capital-driven, for peak risk transfer. The individual subsidiaries of a large company group no longer place the business themselves,” Arnoldussen said. The strong capitalisation of most insurers


has also prompted them to retain more, further reducing demand for reinsurance. Arnoldussen said a culmination of all these factors has resulted in a tiering of the reinsurance landscape. “We observe that cedants now prefer to


place the bulk of their treaties with two or three anchor markets at different terms and conditions. This creates a split: into a first tier of quoting markets that deliver value beyond pure capacity, and an increasing variety of following markets trying to get a share of what is left; and this split is increasing.” This in turn creates more impetus for


consolidation between reinsurers. Arnoldussen said Munich Re is unconcerned by the mergers between smaller players, but he does believe it could lead to more technical pricing and hence be good for the market in the medium term. “I expect that consolidation in our industry


will continue for some time, probably several years,” he said. “In the league that Munich Re plays in, there are no significant advantages in being a little larger, nor does being a bit smaller mean any disadvantage. All that matters is whether the company you buy offers what you didn’t have before.”


“Munich Re is devising innovative coverage concepts that go beyond the scope of traditional reinsurance.”


As a result of this upheaval in the market, he


says it is difficult to predict the outcome of the renewal negotiations next January, but he hopes pressure on prices will begin to ease. “Competition should remain intense


as


long as there are no extraordinary loss events or other major market upheavals during the last months of the year, but the pressure on prices should ease still further after two years of price deterioration,” he said. Within such an environment, Arnoldussen disciplined underwriting is


stresses that


becoming increasingly important. Reinsurers cannot rely on a market cycle to eventually improve rates for the market. “No-one can be sure that business that is


presently underpriced will earn money back at some future date. That is why disciplined cycle management is central for Munich Re,” he said. “As part of our cycle management we shifted


our own traditional portfolio from nat cat excess- of-loss and other property lines to casualty some time ago. Now it seems other players are doing this as well. However, the biggest strain for the casualty market is resulting from the persistent low interest rate environment.” n


Beazley expects robust negotiations on price and terms


(Continued from bottom of page 1) a competitive quoting environment and over- placement of firm order terms,” Mills said. “Beazley intends to continue to trade with long-


term supporters of our products, but the presence of plentiful new capacity is putting incumbent markets under pressure and we are seeing the benefits of this dynamic.” He said one of the few exceptions to this rule is


on US catastrophe business, where he expects the rate of decline to slow in 2016. The company will not be making any radical


changes to its programme but it is incorporating more multi-year and composite coverages. “Our strategy has altered very little in the last few years and next year will not bring any


significant changes. We continue to focus on broad, long-term support


from highly rated


counterparties,” he said. “We have been buying a little more multi-year


cover, and a little more composite cover, and we have successfully broadened our relationships with a small number of core supporters. We have a clear and efficient strategy that serves our needs very well.” With the disruption in the market, Mills thinks


some players may hedge their bets for longer this year. He stresses that Beazley wants to engage in talks early, leaving adequate time to negotiate. “There will be a mix of early movers, late


movers and everything in between. Beazley will be looking for a good orderly renewal process, engaging with markets early and leaving time for a William Mills


2 | BADEN-BADEN TODAY | DAY 1: Monday October 19 2015 www.intelligentinsurer.com | www.bermudareinsurancemagazine.com


robust negotiation on coverage and price,” he said. “We certainly don’t expect to be trying to


place cat covers on New Year’s Eve. I wouldn’t be surprised to see US wind covers renewing earlier following some anecdotal signs of a shift in the supply-demand balance over the summer.” n


drive innovation, conquer new risks and push the boundaries of insurability, Ludger Arnoldussen, member of the board of management at Munich Re, told Baden-Baden Today. “It will be crucial that we as an industry— insurers and reinsurers—are


R capable of


DIRECTOR Nicholas Lipinski


developing new products that suit our clients’ needs better or more comprehensively than in the past,” he said. “Munich Re is devising innovative coverage


concepts that go beyond the scope of traditional reinsurance and, to an increasing extent, also beyond the conventional boundaries of insurability.” Arnoldussen named cyber, energy,


YOUR CONTACTS IN BADEN-BADEN John Walsh PUBLISHER Telephone: +44 7803 04 79 86 Email: john.walsh@newtonmedia.co.uk


reputational, supply chain and business interruption risks as areas where the industry can innovate and thus find growth. But success will be achieved only by better communication, he said. “To successfully innovate, it is important to


have direct contact with insureds. This access can be achieved either via primary insurance models, or via strategic partnerships,” he said. The expansion of digital networks and the


Wyn Jenkins MANAGING EDITOR Telephone: +44 7715 770 468 Email: wjenkins@newtonmedia.co.uk


rapid evolution of hardware and software is opening up significant business opportunities. One example of this is in the area of non- damage business interruption insurance or cyber risk coverage. “Our experts have been working for many


years on cyber risks and enhanced coverage options,” he said. “Munich Re now offers a broad spectrum of reinsurance solutions in this field and is also able to cover accumulation perils such as virus-related losses.”


how the profile of classic reinsurance clients on the primary insurance side will change. “Business models are changing,” he said. “Companies are bringing primary insurance and reinsurance together. The primary insurers are getting bigger and have different demand patterns post-consolidation. (Continued top of page 2)


PRODUCTION AND DESIGN Fisherman Creative


eflecting a sentiment of many other reinsurance buyers, William Mills, group


head of ceded reinsurance at Beazley Group, is seeking to improve the terms, conditions and pricing across all classes of business, he told Baden-Baden Today.


expect improvement www.intelligentinsurer.com | www.bermudareinsurancemagazine.com He said that while the company intends to pricing


remain loyal to its long-term reinsurance partners, it is also benefiting from the intense competition between reinsurers on most classes of business. “We


to continue to achieve in terms, conditions and


He cited two other areas where he feels


Munich Re has demonstrated innovation. One is a new coverage concept for reputation risks; another covers launch-plus-life cover for the entire useful life of satellites. This quest for innovation is driven by the


multiple pressures facing the industry which are hindering growth and triggering fundamental change through the growth of new risk transfer mechanisms and further consolidation. Arnoldussen said it will be interesting to see


Ludger Arnoldussen Powered by:


19.10.15 MONDAY


BADEN- BADEN TODAY


Monday October 19, 2015


INTELLIGENT INSURER’S Baden-Baden Today IS PUBLISHED BY NEWTON MEDIA LIMITED. Registered Address: Kingfisher House, 21-23 Elmfield Road, BR1 1LT, United Kingdom www.newtonmedia.co.uk


Munich Re seeks to push boundaries of insurability


einsurers and insurers must better leverage their shared knowledge and expertise to


What’s inside


3 DATA & ANALYTICS—SUPPLY AND DEMAND: AON


4 PEAK RE’S DIVERSITY WOOS EUROPEAN CEDANTS


6 FACILITATING GROWTH: DARAG


8 GIC RE: BOUND BY NECESSITY


10 THE INNOVATION GAME: MATRIX


12 SWISS RE’S BADEN-BADEN SURVEY


14 A FAMILIAR HAND: AZ RE


16 GUY CARPENTER SYMPOSIUM REPORT


18 CITADEL RISK: BESPOKE AND EFFECTIVE


19 THE DEVIL IS IN THE DETAILS: WILMINGTON TRUST


20 REINSURANCE AWARDS: EUROPE’S BEST


The panel at the annual Guy Carpenter Symposium in Baden-Baden yesterday (Sunday). For a full report from this event, see p16.


Beazley expects robust negotiations on price and terms R


across all classes.


are almost universally broadening appetite


Reinsurers their


for additional classes of business,


particularly those reinsurers with a more pronounced focus on US cat, so we continue to


see (Continued bottom of page 2) ©Newton Media Limited 2015. All rights reserved. DAY 1: Monday October 19 2015 | BADEN-BADEN TODAY | 1


No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electrical, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher.


The views expressed in Intelligent Insurer’s Baden-Baden Today are not necessarily those shared by the publisher, Newton Media Limited. Wishing to reflect the true nature of the market, the editor has included articles from a number of sources, and the views expressed are those of the individual contributors. No responsibility or liability is accepted by Newton Media Limited for any loss to any person, legal or physical, as a result of any statement, fact or figure contained in Intelligent Insurer’s Baden-Baden Today. This publication is not a substitute for advice on a specific transaction.


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Intelligent Insurer – ISSN 2041-9929


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