Reinsurers adopt innovative methods as competition soars
Reinsurers are thinking more innovatively and seeking diversification in a bid to improve their bottom line, says Mohammad Khan, head of general insurance at PwC.
Speaking to Intelligent Insurer, Khan said that reinsurers are no longer relying on the “usual methods” to be relevant.
“Given the current rating environment, reinsurers have been doing a few things to protect the bottom line,” says Mohammad Khan, head of general insurance at PwC.
“Reinsurers are cutting back on capital-intensive and less profitable business; writing more direct business where they perceive they have competitive advantage and it gives them more return; writing more business that helps them diversify including a big push into speciality business; and cost-cutting to reduce expenses.”
Mark Taylor, insurance partner at KPMG agreed with Khan, saying that re/insurers are shifting into more profitable lines via the use of more quota share business, entering into emerging markets and seeking new risks such as cyber.
“One popular strategy is shifting into profitable insurance lines, usually through writing more quota share business. This could be through their own primary insurer, supporting its underwriting through the provision of back-to-back reinsurance capital, or by writing larger or more extensive coverage with strategic partners, existing clients or even new start-ups, the latter being more risky and uncertain.
“An exciting area is innovation, in particular in the primary market with the development of new products. Could we call cyber cover an innovation? It has certainly been getting a lot of interest. Reinsurance definitely has a part to play here.”
However, the adverse climate has been beneficial for some re/insurers that have managed to capitalise on new regions.
“The acquisition of Canopius by Sompo Holdings provides us with a substantially increased financial base and broader distribution opportunities, which has allowed the group to adopt a greater risk appetite. Our expansion into the Latin American marketplace has allowed us to bring new business into Lloyd’s, helping to offset diminishing opportunities in the UK and Europe,” said Graeme Brydon, divisional underwriter casualty, Canopius.
“While clients may be retaining more risks and reassessing their reinsurance requirements, the combination of our increased firepower and relevance as part of the Sompo Group, our increasingly established position in the North American casualty treaty sector and diversification into new territories means that in fact Canopius has progressively become a top tier market for both brokers and clients.”
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