Ecclesiastical looks long term but won’t dismiss reductions

Against a backdrop of unrelenting market pressures on reinsurers, including an elongated soft market and increased competition for business on all fronts, Mark O’Riordan, head of group reinsurance at Ecclesiastical, is seeking stability and long-term relationships.

The buyer for the insurer, which specialises in heritage, charity, education, real estate and faith insurance, told Monte Carlo Today that while he cannot say he would not agree to rate reductions, he will balance this out with the desire to sustain the long-term two-way relationships Ecclesiastical enjoys with reinsurers.

“We are a specialist insurer and we have transformed the business in recent years,” O’Riordan said.

“We took some difficult decisions about moving out of some unprofitable areas that have now paid dividends. The transformation has enabled us to hit our target of donating £50 million ($66.5 million) to charity in just over two years and this has been made possible in part by the support of our reinsurers. The original rating environment is challenging for us but reinsurance can support us to cope with that.

“While I would be willing to take advantage of what is available in the market now, in terms of rate decreases, I would also look to balance that with our long-term aims.”

He said he expects a small number of tweaks to his reinsurance programme this year but, generally speaking, consistency is the order of the day.

“We have always aimed to establish deep relationships with our main reinsurers. The panel is a very long-term set of players who understand Ecclesiastical and the specialist markets we operate in. We have a very different portfolio from some of our competitors so that close relationship is important to us.”

Ecclesiastical has not yet used alternative risk transfer tools such as insurance-linked solutions (ILS) or collateralised reinsurance. O’Riordan said he is fully aware of the potential of these structures and he has been approached about using such tools. While he does not rule it out for the future, it does not meet his requirements at this stage.

“We are keeping a watching brief on how that market develops,” he said. “We are known for our traditional approach and it would take a big change for us to change structures.”

That said, Ecclesiastical is moving into new products. It has started offering a cyber solution to customers on some products. He said reinsurers have been supportive on this and it has developed solutions with its brokers. “We have developed separate reinsurance agreements for that,” he said.

O’Riordan agrees that the challenging market conditions will be the main talking point in Monte Carlo this year. He believes rates are continuing to soften, although at a slower rate than previously.

“That is despite some big losses globally such as the wildfires in Canada and the floods and hail in the US,” he said. “Rates may not be flattening out but in the absence of anything significant happening I cannot see the trend changing.”

He also believes the tough market will continue to drive mergers and acquisitions in the industry.

“There has been a lull in activity for a while but I think further consolidation is inevitable. We are aware of the consequences of this. We have limits on our risk appetite so if two reinsurers on our panel joined we would need to consider the implications of this and take action where necessary. We like a diverse panel so that is probably inevitable at some stage,” he concluded.