Europe continues to present opportunities for Bermudan reinsurers, but only if they are prepared to knuckle down for the long haul, demonstrate their commitment to the region and take a flexible approach to addressing client needs. Bermuda:Re+ILS reports.
Aspen Re first set foot in Europe at the end of 2007, attracted—like most players—by the sheer size of the market. Europe represents just 7 percent of the world’s population yet is responsible for 23 percent of its GDP and no less than €450 billion ($578 billion) of non-life premiums. Around 33 percent of overall insurance premiums in the world are written in Europe.
“Even though the European economy is a bit challenging it is still the largest insurance market in the world,” says Jacopo D’Antonio, managing director of Aspen Re, Europe. With that comes demand for reinsurance and Aspen Re recognised real potential to grow.
“It is important to go into the core of this region to access these large volumes of premium income,” he says. That meant finding a suitable base, and after considering Munich, Zurich and Paris, Aspen Re felt that Zurich was the natural choice.
“Zurich is an established market with many players now operating here. You have a strong pool of talent and expertise, a very conducive business environment and a very efficient regulator. All this meant that Zurich was the right choice,” he says.
Follow the leader
It’s no surprise that in the years that followed numerous other players have followed suit—so many, in fact, that D’Antonio is hard pressed to think of a reinsurer that does not have a foot in Zurich.
Not that it has been easy for the newcomers. D’Antonio is keenly aware of the strength exerted by the long-established players in the market.
“It is a very competitive market because here in Europe we have the longest established reinsurance companies, and we also have a very conservative client base,” he says.
It was a similar story for Catlin when it arrived in Zurich almost eight years ago.
“The result is that if a client has a specific need, we can tap in into wherever this expertise is based.” Jacopo D’Antonio
“In terms of reinsurance, Europe has been dominated by the big players—Munich Re, Swiss Re, Allianz,” says Catlin’s CEO Stephen Catlin. “The issue is less one of competition and more to do with the preparedness of the buyer to change his relationship with existing carriers and decrease the amount of business ceded to them.”
Catlin believes that there is now a drive for that to happen.
“The buyers of reinsurance are increasingly not sure that they want so few eggs in one basket—they’re looking for a bit more of a spread.
“It isn’t an accident that when we went to Zurich there were only two or three reinsurance carriers. If you go to Zurich today I think there are 23, and that’s happened in a five-year period. Zurich has become a reinsurance hub for Europe.”
However, it is not enough to simply be there. In order to win business, you need to be perceived as having made a long-term commitment to the region.
“You need to establish trust and that does not happen overnight. To get the presence in any new market you need to be there for five years before you can move the dial—it takes that long to get the trust and for people to think you are there to stay,” Catlin says.
A ‘feet on the ground’ approach is central to Tokio Millennium Re’s (TMR’s) ongoing expansion. Having redomesticated from Bermuda to Zurich, the company is now looking to further deepen its footprint in Europe.
“The European cedants like the European balance sheet,” says CEO Tatsuhiko Hoshina. “It’s a very tough market—the upside is that they are very loyal to their reinsurers so once you’ve built a relationship it’s a long one; the downside is that you have to get your foot in that door.
“We take a long-term view; it has always been TMR’s approach that we are not here for the fast buck, we are here for the long term, so we are very patient in penetrating the European market.”
The region called for a very different approach from the one the company had employed in Bermuda.
“Instead of being very transactional, going treaty by treaty, we have a far more company-versus-company relationship, providing them an overall product line,” he says.
“If it makes sense, we will build that relationship. It’s different from what we’ve been doing in Bermuda where it’s much more cat prone, and very analytical—we’re still very analytical in Zurich but much more transactional in Bermuda.”
“Once you’ve built a relationship it’s a long one; the downside is that you have to get your foot in that door.” Tatsuhiko Hoshina
D’Antonio agrees that it is important to tailor your approach to the European market. He says Aspen Re’s success has been built on four pillars: strong client relationships; a very consistent approach to pricing, a focus on attracting local talent and expertise—people who are recognised in the local market—and sizeable and stable capacity.
While the Zurich base is a key part of Aspen Re’s geographic footprint, the business also draws on the expertise available at its other hubs, for example in London and Bermuda, striving to create a tailored response to its clients’ needs.
“We can deploy all of our resources for the client: some of those resources are located in Zurich, some are located in London and some are in Bermuda. The result is that if a client has a specific need, we can tap in into wherever this expertise is based.”
Room to grow
While Europe presents a very different set of challenges and opportunities compared to the emerging markets, there is still plenty of room for growth, even amid the clamour of new players keen to source business in the region.
D’Antonio believes there is good growth potential in Europe across both established and emerging risks. He says that emerging environmental and cyber risks have potential, and notes that there will always be need for cover against natural catastrophe.
Peter Schmidt, CEO of Catlin Re Switzerland, agrees that there is plenty of room for growth in the region.
“People are always talking about emerging markets as the future of the industry and I truly believe in that: Asia will grow, China’s potential is enormous but in Europe we still have great chances of increasing the penetration rate,” he says.
“Penetration is high but we can do much more.”
He believes the key for this growth may lie in raising the public profile of the industry, promoting understanding of what insurance is and why it matters.
“For me, one of the biggest opportunities at present is to increase the penetration and make this a marketing effort. As an industry
we definitely need to explain better. We have to do a sales job in order to persuade the public that to some extent the world would not turn as it does today if it wasn’t for insurance. That’s a big opportunity.”
Schmidt adds that simplified policy wording could be a step in the right direction.
Regarding challenges to the industry in his region, he cites the present unrest in the Ukraine as a significant concern.
“It could impact the European economy and what that will do to a slowly recovering market remains to be seen,” he suggests.
Other threats include war in the Middle East, and cyber risk.
“These are all challenges we are facing as an industry going forward—we certainly won’t be bored,” he says.
In a competitive market Catlin has been able to secure a foothold in a challenging and competitive Europe environment by emphasising client relationships and a service-focused approach. The company has emphasised talent, significant industry experience and language skills when recruiting, and has adapted its approach to suit the different countries it operates in.
“We always try to bring expertise to the table,” he said. “Attracting talent with a knowledge of the markets has been a key factor.
“We are very proud to be where we are at this point in time. I have been positively surprised by the reception we’ve received in the market over the last four years.”
While the market in Europe is mature, crowded and resistant to change, feet on the ground, a tailored approach and an emphasis on client relationships all promise to reap dividends. The region looks set to intrigue and challenge Bermudan reinsurers for many decades to come.
Reinsurance, Europe, Aspen Re, Catlin, Tokio Millennium Re