EXCLUSIVE: Reinsurers with primary carriers risk conflict with cedants

While ‘diversify’ has been the mantra of many large reinsurers in recent years as they seek growth in stagnant markets and enhanced profits outside the elongated soft market in reinsurance, some strategic plays could rapidly become a double-edged sword for some players.

Large reinsurers that have aggressively expanded into primary insurance in recent years could start to face a backlash from their clients, warned Jed Rhoads, the president and chief underwriting officer for Markel’s Global Reinsurance Division.

“We are starting to hear grumblings from cedants that reinsurers, especially those with large shares of reinsurance placements, are not welcome to compete directly with them on the primary side,” he said.

The message seems to be hitting home in some cases. PartnerRe, which was acquired by Italian investment fund Exor last year and is now privately owned, announced that it has dropped its aspirations of building a major primary business and is refocusing as a pure-play reinsurer.

“The old PartnerRe had started build out primary operations and had launched PartnerRe Wholesale but we are moving away from that,” said Charles Goldie, head of specialty lines at PartnerRe Global. “We don’t want to compete with our clients going forward. That is not comfortable for us.

Hannover Re also made this point during a press conference at the Monte Carlo Rendez-Vous. Ulrich Wallin, its chief executive officer, says the business is not interested in pushing into the corporate market, in contrast to its main competitors, because it does not want to compete with primary insurers.

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