The real winners in what is a rapidly changing reinsurance industry facing severe “headwinds” will be those players large enough to easily move capital to the most profitable lines while being able to cope with the growing cost and constraints of increased regulatory burdens.
That was the view of several panellists speaking at a debate held at the International Insurance Society’s annual conference in London on Tuesday June 24).
Denis Kessler, chief executive of SCOR, said he remains optimistic partly because of the increasingly fragmented nature of markets, allowing large global players like SCOR to target suitable lines of business by class and geography as best suits them.
“I don’t like sweeping statements that imply the market is soft; you can still make money in this environment because there are big differences between lines of business and the way rates are behaving in different countries,” he said.
He accepted that significant pressure has been brought to bear on certain peak perils lines such as US cat business, but noted that this only represents between 2 and 3 percent of SCOR’s global portfolio.
He went on to say that he believes that smaller companies unable to cope with growing regulatory demands and which also lack diversification will be the first to suffer and many will be forced into consolidation to survive.
“Tier 3 reinsurers with no diversification operating in lines of business that are becoming increasingly commoditised will be the first to suffer,” he said. “It will be tough for them and I anticipate consolidation because of this. Companies that have a good global franchise will be able to reallocate capacity and identify opportunities to continue to grow and remain profitable.”
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IIS, Denis Kessler, Europe, SCOR