Solvency II amps up talks on capital

The implementation of Solvency II has accelerated the trend of insurers focusing on reinsurance as a capital management tool and many are keen to form deeper relationships with certain reinsurers with this in mind, Jay Nichols, the chief executive of AXIS Re, told Baden-Baden Today.

“This was happening for some of the smarter companies before Solvency II but it has amped up that process and we find more clients want conversations on capital now. Solvency II means they can quantify what they want to do and run it through their internal capital models giving a different perspective on their purchasing decisions,” he said.

He explained that reinsurance is regarded as more than a promise to pay claims—it is also accepted as a form of capital by rating agencies and regulators and is now used in this way as a complement to debt and equity by many insurers. “It is also scalable and reasonably priced,” Nichols said.

Nichols explained that AXIS is happy to work with clients on this basis and regards itself as a Tier 1 reinsurer in the lines of business in which it operates.

“Every buyer has its own system of tiring now; our goal is to be a Tier 1 player in our lines,” he said. “We are not everything to everybody. We don’t do life business and there are other lines we don’t operate in. But we are also big enough to be very relevant to our clients and be at the table as a specialty player.”

Nichols said pressure remains on rates in the market though it is harder to generalise about rates in Europe because of the region’s fragmented nature with each market having its own nuances and resulting pricing dynamic.

But even in a tough market, he stressed that reinsurers should simply focus on client service. “There is a lot of pressure, the question is how different firms handle that,” he said.

“It is certainly not doom and gloom for us, it is just a question of continuing to serve clients, understanding what they want and delivering solutions.

“I am certainly not a price guy. My job is to figure out what customers are interested in and be creative in how we help them with that. We design solutions to meet their needs and which ultimately may also make the overall pie bigger.”