Baden-Baden Survey in association with Swiss Re: Day 2
In association with Swiss Re, Baden-Baden Today has been conducting a survey of conference delegates, the responses to which will be published daily.
Is Solvency II an opportunity or a challenge for the insurance industry?
“It depends on who you ask. For a lot of ceding companies it’s a challenge, particularly in those countries where regulators have not been able to assess internal models. We will see more companies using the standard model rather than their internal models and that may require them to buy additional reinsurance to provide capital support. So for reinsurers it might be an opportunity.”
Chris Klein, managing director, head of EMEA Strategy Management, Guy Carpenter.
“It’s certainly a challenge, because it’s expensive. It’s a set of rules that weren’t really designed for a complex institution like Lloyd’s. But it’s an opportunity because under our turnkey managing agents you can start a business at Lloyd’s and take advantage of our internal capital model. Solvency II, for all its critics, actually makes Lloyd’s one of the best places to start a new company.”
Tom Bolt, director performance management at Lloyd’s.
“Solvency II has been a bit of a muddle. Ten years ago, many predicted billions of dollars of new reinsurance premiums because it would increase capital requirements. The process was then stretched out over a decade. There are still instances where carriers need additional contingent capital but it is now mainly at the margin. This said, there is still an opportunity for brokers to advise companies about Solvency II.”
David Flandro, CEO, JLT Re
Other anwers:
“For the larger insurance groups developing own internal models, the impact has already taken place as they have increased retentions and sought greater benefit of the diversification within their own business. For smaller companies only beginning to face the coming reality with the application of the standard model, it will have a beneficial impact on reinsurance purchasing particularly for companies that are heavily driven by a single line of business.”—the chief executive of a European ILS fund and investment adviser.
Which lines have specific challenges, from your perspective?
“In terms of property we have to be clear about coverages. We’ve seen losses happen where there’s dispute over whether such a peril is covered or not. That’s definitely not good. There needs to be a greater focus on ensuring there is clarity in coverage and it is priced correctly so there is no dispute following a loss. It’s not good for the credibility of the industry.”
Patrick Hartigan, team leader, treaty, Beazley.
“Property cat is one, clearly. Meanwhile, low interest rates are not helping on the casualty side though there is probably slightly less appetite for casualty than there is for property. The capital markets are less active on that side but any additional pressure that is put on casualty, because of this economic environment, will make the business tougher.”
Eric Gutierrez, CEO European Reinsurance, Sompo Canopius Re
“In Germany there are a number of prominent companies that might give up life insurance, which is whole life with guaranteed income rates. Some major life companies have basically just walked away from the classic life product with guaranteed interest rates, so life is certainly an important area in the context of the Solvency II situation.”
Manfred Sietz, managing director, Berkshire Hathaway.
Other answers:
“Financial lines, cyber risks”—Anton Shchegolev, deputy general director, Rifams Insurance Broker.
“Cyber in order to come to a pragmatic discussion. There is a clear need but a blurred offering; plus all long-tail classes”—the director of reinsurance at a German reinsurer.
“Heavy commercial/industrial property lines where attritional losses have been higher and prices are weak and in need of correction”—the chief executive of a European ILS fund and investment adviser.
