News Hardball-playing brokers guilty of prolonging soft market


(Continued from top of page 1) “The return on equity for US cat is barely one


digit. If you are going to put significant capital on these capacities you have to have significant return,” he said. SCOR has set an internal target of 10


percent, which Conoscente believes is achievable. But SCOR is targeting growth in the US, a


market it remains underweight in compared with many other mature markets, largely because of its European roots. “We are looking to grow all lines of business including property,” he said. “Casualty is another area where we are also underweight,


a reinsurer” and does not compete with its clients. “We have a primary reinsurance carrier but that is for the support of existing insurance companies. We are a pure reinsurance player,” he said. He added he did not see the growth of


alternative capital as a threat to SCOR’s business model. “It’s not our main driver,” he said. “We use alternative cap for retrocession and we have our insurance-linked securities (ILS) in Luxembourg. “We try to be agnostic to alternative capital.


as are


specialty lines where we will look to grow further.” Conoscente believes that even though the


reinsurance market is shrinking, opportunities remain to work with partners that share SCOR’s approach to business. Its client-focused approach, which allows it to support a range of different lines in different geographical locations, has real value, he said. “We want to identify clients we can work with


across all our reinsurance programmes. Rather than lines of business-focused it’s more client- focused; we try to support them across all the lines of business we write,” he said Despite his criticism on rates, he admitted


brokers have an important role to play. “Running the business through a broker will remain our business model but we also have an overall approach with the client who wants to take a global view as we do,” he explained. Conoscente also stressed that SCOR is “just


We embrace it but it doesn’t challenge our business model. It is challenging our competitors; some are rushing into other lines of business and other geographical areas. It’s putting a lot of pressure on reinsurance rates.” Conoscente believes the market is becoming


more tiered, with smaller players finding it harder to compete. He blames regulation for this—both in Europe and in the US. Describing gearing up for the implementation of Solvency II as “horrendous” he added: “There are more national regulatory demands than before. Even though they are trying to develop some kind of equivalence, there are more local regulatory demands than in the past and we think that is going to drive a lot of business models in the future. “The only way tier two and tier three reinsurers


will exist in the long term is through mergers and acquisitions (M&A) and that is going to continue. It’s also happening on the insurance side where they are facing similar difficulties with organic growth so M&A is an alternative there too.” n


Schultz defends broker role in prolonged soft market


(Continued from bottom of page 1) currently largely backed by governments, are moved into the private sector. While still in its early stages, the public-private


revolution it is a theme that “will be developing in the marketplace in next few years”. “Some entities that in the past have retained


lots of risk will come under pressure to move that risk off their balance sheet. If you can produce innovative solutions that are cost-effective for these types of interests in, for example, less developed


countries, that represents a good 2 | PCI TODAY | DAY 3: Tuesday October 27 2015


“I don’t think that any one party is responsible.”


opportunity,” he said. In contrast, cyber was a risk that did not offer


the same attraction at this moment in time. “Cyber is an opportunity that needs more


research and development but it is a risk that is only going to increase in the future, he said. “Working out how capital can be best deployed


to provide solutions for clients is going to take a lot of thought involving the whole industry.”n


Paul Schultz www.intelligentinsurer.com | www.bermudareinsurancemagazine.com Powered by: PCI TODAY Tuesday October 27, 2015


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Hardball-playing brokers ‘guilty of prolonging soft market’


the blame for the continuing softening of rates, Jean-Paul


C


ompeting brokers keen to get a better deal than their rivals should bear the brunt of


Conoscente, senior vice president


DIRECTOR Nicholas Lipinski


and chief underwriting officer at SCOR treaty underwriting, told PCI Today. “It is more the brokers that are playing


hardball than the clients,” he said. “Clients are mostly happy with the terms they have achieved and are interested in keeping long-term relationships going at the current terms. “The brokers are under threat and have to justify


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their fees. They are the most aggressive regarding terms and conditions just to prove to their client that they can do a better job than a competitor.” Now, Conoscente claims, many of the leading


David Ward Penny Tel: +44 7477 535 740 Email: dward-penny@newtonmedia.co.uk


reinsurers are ready to say “enough is enough” and draw a line in the sand with regard to property/casualty (P&C) rates. “At some point you have to draw a line,” he


said. “Everyone agrees that we are as close to the bottom as we are willing to go.” This toughening of the line follows several


years of softening rates in the P&C sector. A combination


of catastrophe-free years and a challenging investment marketplace has seen


some underwriters struggle to remain disciplined in such a challenging environment. “US casualty has rock hit bottom,” said Conoscente. “Commission levels are high already and room for additional commission is nil to very limited. On the property side, margins have been squeezed significantly by the capital markets.” Despite this, he foresees yet more woe in store


for the sector. He predicts further rate decreases of up to 3 percent in what has been another catastrophe-free year. “The return on equity for US cat is barely


one digit. If you are going to put significant capital on these (Continued top of page 2)


Caroline Foxwell Tel: +44 7789 402 023 Email: cfoxwell@newtonmedia.co.uk


aul Schultz, the chief executive of Aon Securities, has hit back at the assertion that


brokers are facilitating the continuing soft market by putting their own interests in front of those of their clients and keeping rates suppressed. He was responding to comments by Jean- Conoscente, senior vice president and


Paul


PRODUCTION AND DESIGN Fisherman Creative


chief underwriting officer at SCOR treaty underwriting, who suggested clients are basically


www.intelligentinsurer.com | www.bermudareinsurancemagazine.com


Schultz defends broker role in prolonged soft market P


happy with existing terms and conditions and it is the brokers pushing for ever-better client deals. “I definitely don’t think you see that kind of


behaviour,” said Schultz. “The brokers are not putting their interests in front of those of the client.” “I don’t think that any one party is responsible for


the way the market behaves,” he added. “Markets tend to be efficient because if capital is priced inefficiently another part will be pricing it rationally.


Jean-Paul Conoscente What’s inside


3 THE PATH TO SUCCESS: AON SECURITIES


4 RMS EYES OPPORTUNITIES IN FLOOD RISK


6 INSURERS MUST PUSH FOR ‘EQUAL VOICE’ ON REGULATION


8 Q3 EARNINGS COULD BE HIT BY RECENT LOSSES


8 IRONSHORE ACQUIRES NOVAE’S GLOBAL AGRICULTURE PORTFOLIO


9 SURVEY: NEW CAPITAL AND GROWTH BIGGEST WORRIES


10 DISPLACED TALENT COULD DRIVE INNOVATION


10 BERMUDA WELCOMES START-UPS


11 THE BARBELL PHENOMENON: DEMOTECH


11 EXCHANGE-TRADED RISK CAT RISK MOVES CLOSER


12 PRESSURE ON TO DIVERSIFY: AM BEST


12 CONSOLIDATION AND THE RISK MANAGEMENT PUZZLE


14 FOSUN BOOSTS IRONSHORE ENVIRONMENTAL UNIT


14 CORELOGIC URGES GREATER USE OF FLOOD COVER


27.10.15 TUESDAY


“Capital providers are making the investment


decisions at the end of the day. The role of the broker is to be an advocate for its clients and to achieve the best possible pricing and conditions in the marketplace.” Schultz added that


challenges facing the market, opportunities for growth would emerge as certain risks such as terrorism and flood, (Continued bottom of page 2)


DAY 3: Tuesday October 27 2015 | PCI TODAY | 1


despite some of the


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