The dynamics of the cycle are establishing which re/insurers have the relationships and quality of underwriting to maintain lines and sustain relationships in spite of current conditions.
That is the view of Mike McGavick, CEO of XL Group, who tells Bermuda:Re that conditions are creating “a tale of two cities”, dividing those able to withstand the pressure of market conditions through underwriting rigour and close links with clients, from those that are not.
He says that XL Group has been able to draw upon the strength of its relationships and its focus on technical underwriting to establish itself among the ‘city’ of re/insurers best positioned to withstand current market pressures.
For those re/insurers without the relationships and quality of underwriting—the other city, in McGavick’s metaphor—conditions are rather more troubling, as they compete for signings in a tough and generally softening market cycle.
Relationships are incredibly valuable when dealing with the challenges thrown up by the cycle, explains McGavick, and are proving a key point of differentiation within the market.
Relationships should consider “mutual balance sheet needs”, not simply the immediate dynamics of the cycle. “While fads and new products come and go, deep trust is enduring,” says McGavick.
It is in establishing and maintaining these enduring relationships that companies in the first ‘city’—XL being one such player—are sustaining their disciplined approach; one that is being sorely tested in the reinsurance space
McGavick warns that while cyclical features are placing pressure on reinsurers, “present conditions do not obligate companies to be foolish. Reinsurers should continue to approach the market with rigour, and recognise that they can still work to create products that are attractive to clients and establish the kinds of relationships that endure market cycles”.
McGavick, XL, reinsurance, insurance