21 October 2015 News

Size no substitute for expertise and client focus: Allianz Re

It is inevitable that the reinsurance industry will increasingly become divided into clusters—or tiers—given the competitive forces at work. This will not be based on size and reach alone, but on technical skills, expertise and the willingness to invest to better understand clients, Amer Ahmed, chief executive of Allianz Re, told Baden-Baden Today.

Allianz Re manages the group’s reinsurance needs and retrocessional portfolio and also writes a small amount of third party business itself. Ahmed said that while many assume that being big and global are prerequisites for becoming a so-called tier 1 player, he takes a more nuanced approach to what he looks for in a reinsurance partner.

“Yes, we look for a strong balance sheet but we also want very high-end technical skills and partners with the resources and willingness to understand our portfolio and invest in securing a long-term partnership with us. It is often the bigger players that can do that, but not always,” Ahmed said.

“We have a global, complex programme and we want relationships that are based on a lot more than just price. We know we can probably buy cheaper coverage but we want consistency and continuity in our programme.

“For me, it is about the relevance of a reinsurer and that is also a function of its skillset and the context of the line of business and the market as opposed to merely size and reach.”

Allianz was one of the first large insurers to overhaul and centralise its reinsurance programme in a process begun more than 10 years ago. It moved away from individual profit centres buying reinsurance to a group approach, a move that, Ahmed said, was partly driven by the capital-base ethos of the predecessors to Solvency II and partly based on a recognition the group could benefit more from its diversification.

“We had so much inherent diversification which we were not benefiting from,” he said. “We centralised everything and restructured to buy coverage in a different way. We were buying less coverage in volume but we focused more on covering peak exposures and getting more comprehensive coverages in place.

“There were previously parts of the world where we did not have much coverage. We have enhanced those and implemented a greater focus on risk appetite and capital.”

Ahmed said that while the soft market was a good thing for most buyers, it represented a double-edged sword for Allianz, since the group was also grappling with soft market conditions on the primary side.

“We get a better deal from our reinsurers in these conditions but it is a vicious circle,” he said. “The primary side is also soft, so it is a squeeze. A harder market is better for me but you cannot have it both ways.”

He added that one anomaly of the current market is that despite coverage being relatively cheap, cedants are not buying more. Allianz is not taking advantage of this either. “We are a strategic, not an opportunistic buyer,” he said.

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