As soft pricing persists and growth opportunities remain vague, reinsurers could find themselves being prompted to re-evaluate their strategies in the near future.
This was according to a panel of chief executives speaking at the ninth annual Bermuda Reinsurance Conference sponsored by PwC Bermuda and Standard & Poor’s (S&P), who discussed what actions reinsurers must take to remain relevant and drive competitive differentiation in an increasingly crowded market place.
During the conference, titled Charting a Strategic Course in Unsettled Waters, more than 200 reinsurance industry leaders were joined by credit analysts from S&P and leaders from PwC’s reinsurance practice for a number of interactive panel discussions.
Don Kramer, chairman and chief executive officer, ILS Capital Management, said that there are massive changes coming forward in the entire institutional market.
“As soft as you think the market is, in terms of risk, last year was an outstanding year. And prices while they are down, are not down anywhere near their absolute lows,” he said.
He added that while the market is now seeing a lot of insurance linked securities (ILS) going around the brokerage markets, it does not mean the market is over.
“It doesn’t mean people don’t have to buy reinsurance,” he said. “It just means we’re going through an interesting period and it requires a lot more analytics than it’s had before – as to diversification and portfolio analysis in terms of where you write.”
Costas Miranthis, president and chief executive officer, PartnerRe, said he believes the industry is better equipped to deal with tough times and is far more sophisticated than it was in the late 1990s.
“I think that the degree of transparency has improved. Fifteen to 20 years ago a lot of the reinsurance capacity was coming from divisions of bigger organisations. A lot of the economics of the reinsurance industry were not particularly transparent to the equity investor,” said Miranthis. “That has changed dramatically over the past ten years particularly as capital has been moving to set up new companies here in Bermuda.”
Arthur Wightman, territory insurance leader at PwC Bermuda, said that there is no doubt that we are in a difficult period structurally and cyclically, which is forcing executives and other stakeholders in the industry to concentrate on both innovation and developing where the next wave of growth can come from.
“It’s also challenging executives to look at their operating models – what do they want to be?” he asked the panel. “Is it scale, is it building out a richer investment strategy? These are some of the questions that I think are so fundamental to focus on and I know many companies are concentrating on just that very point – what do they want to be in the next two to three years and then over the next decade.”
To read about PwC’s Bermuda Reinsurance Conference in full, please click here.
Reinsurance, Bermuda, Bermuda Reinsurance Conference, Don Kramer, Costas Miranthis, Arthur Wightman