At the sharp end of change

11-05-2016

At the sharp end of change

mmatee

As the risk transfer industry continues to evolve and alternative capital finds more ways of playing in the space, Susan Lane, the recently appointed co-chief executive of Tokio Solution, describes to Bermuda:Re+ILS her plans for the business and how she sees the market evolving.

On January 1 this year, Susan Lane was appointed co-chief executive of Tokio Solution, the subsidiary of Tokio Millennium Re that facilitates deals in the so-called convergence market, allowing capital markets investors to access reinsurance risks and vice versa.

Lane was promoted to the position less than a year after joining the company from Aon Insurance Managers (Bermuda) where she was the senior vice president of business development. She was initially made senior vice president, head of business development and client services at Tokio Solution in February 2015 before being promoted to her new role.

Lane now has responsibility for the day-to-day management of Tokio Solution, leading the client-facing, business development activities including growth strategies, product development and marketing.

Lane holds that position alongside Tsuyoshi Harigai, who is also head of operations for the Bermuda branch of Tokio Millennium Re and member of the Tokio Solution board of directors. Harigai joined the Tokio Marine group in 1995, starting his career in the international insurance and reinsurance business as a reinsurance underwriter. In his new role, he manages corporate operations.

The co-CEOs take the reins from Kathleen Faries, who has become head of the Bermuda branch of Tokio Millennium Re.

Lane takes the position at a particularly interesting time for Tokio Solution. The winds of change have well and truly transformed the risk transfer industry in recent years, with so-called alternative capital finding ways to enter the market through increasingly sophisticated but also tried and tested means ranging from full scale insurance-linked securities (ILS) to sidecars to private, bespoke deals facilitated privately.

Against this backdrop, Tokio Solution is well placed. Formed in 2012 as an insurance manager to act as a full service market facilitator to the convergence market, Tokio Solution has capitalised on the desire from investors to find new and innovative ways to deploy capital to maximise returns. The company develops and facilitates tailor-made solutions to allow investor participation in the reinsurance market.

No room for complacency

When it was formed Tokio Solution was ahead of the game, but Lane acknowledges that the market is changing.

“It is becoming a more mainstream offering; the market has absolutely developed,” she says. “Investors are highly sophisticated and more knowledgeable about this asset class than they were a few years ago and participation in the market has really increased. Third party capital is now permanent and plays some part on the majority of reinsurance programmes.”

“We have the benefit of Tokio Millennium Re’s paper and use our own analytics and technology. But we also offer collateral management and claims management services."

She stresses that the landscape is also changing in other ways. While a growing number of reinsurers are offering something similar to Tokio Solution, she says that investors are becoming increasingly discerning in terms of the partners they will work with.

“It is not something just anyone can do well,” she says. “You have to know what you are doing, have the technical expertise and understand the models thoroughly so that the risk is underwritten correctly and investors attain the required level of return.

“Tokio Solution really stands out from the crowd in this way. We have a very strong value proposition. We are very close to our clients, who we prefer to refer to as partners. We form very deep relationships and a lot of effort goes into establishing how well we work together. Then you also have a very high level of sophistication around the risk—how that is sourced, priced and packaged.”

Lane says that Tokio Solution’s approach is also changing as it considers how this market might evolve and grow in the future. She predicts that the utilisation of big data could become a differentiating factor in the market.

“We have been looking at how we can utilise big data to gain a competitive advantage. That could become key to managing evolving risks. It will be a real key to success, we believe.”

Lane believes that investors are more sophisticated and their appetite is growing for a greater diversity of risks. Speaking ahead of the SIFMA conference in New York, which focuses on ILS and alternative capital, Lane said she forecasts that the geographical expansion of risks that alternative capital can participate in will continue.

“We have already seen a number of new regions including China and Italy use ILS as a risk transfer technique in recent years and we think this process will continue. Many of these regions are uninsured or underinsured and a variety of solutions could ultimately come to the fore.
“Expansion in some of these markets has been difficult historically because of the lack of data and analytics but as that improves innovative and creative solutions will emerge.”

A new cycle

In an industry that has traditionally revolved around a small number of key conferences at key times of the year, such as the Monte Carlo Rendez-Vous and Baden-Baden, Lane says that in the world of alternative capital, conferences such as SIFMA are rapidly becoming a key date in the calendar.

“I find that it is very well placed in the calendar and a great opportunity to meet face to face with partners heading into renewals in April or July. These interactions are increasingly important in a soft market. People are looking to adapt their business model in this market.”
Her aims for the next year involve simply building on what the company has already achieved.

“When we think of where we have come from, it is very much a case of continuing our long-term strategy that has been developed from the beginning. We are seeking more growth but also product innovation and being more responsive to our partners’ needs in these challenging market conditions.”

One of the advantages of working with Tokio Solution, she says, is the ability to use the paper of its highly rated parent Tokio Millennium Re.
“Tokio Solution offers its partners exclusive access to Tokio Millennium Re’s highly rated paper and facilitates broader access to risk,” she says.

Tokio Solution is also seeing growth working with investors who want to build stop-loss portfolios.

“We have the benefit of Tokio Millennium Re’s paper and use our own analytics and technology. But we also offer collateral management and claims management services all through Tokio Millennium Re,” Lane says.

“We offer a comprehensive full service package that is not available elsewhere. That is very attractive to our partners. We have specific partners we work with who are sophisticated and understand the risk.”

It is a case of onwards and upwards for Tokio Solution as it continues to add to its team. In December last year, Butch Agnew joined as vice president, ILS Portfolio Management, a move that Lane says underscores the company’s “commitment to continuously expand on the service offering to Tokio Solution’s third party capital partners”.

Agnew has more than 15 years of experience in capital markets, captive management, broking, business development and finance. Prior to joining Tokio Solution, he was vice president, business development and client services with Dyna Management Services. He also worked as financial controller of AQR Re Management and with Aon Insurance Managers where he held positions as global director ILS, and vice president, captives.

“The team is growing. Butch’s hire is important for our partners who operate in the ILS market as he brings a deep understanding of that space,” Lane says. “This was a significant hire for us and takes the Tokio Solution team to 16 as we build on the foundations the company laid down in the first few years.”

She again stresses that while the kind of services offered by Tokio Solution are becoming more widely used, she believes investors will increasingly turn to trusted specialists.

“I do not think that every company is able to provide the same offerings as Tokio Solution. There is a trend where reinsurers are evolving their business models. Not all of them are solely traditional reinsurers any more. They have some form of third party capital strategy that they are pursuing that suits their business model."

 

Tokio Solution, Tokio Millennium Re, Susan Lane, Reinsurance, Bermuda

Bermuda Re