Too many reinsurers offer nothing beyond capacity: Allianz
With pricing in the reinsurance market close to the bottom of the cycle there are too many reinsurers competing in the market with no value proposition beyond simply providing capacity. This is likely to put M&A firmly on the agenda at the Monte Carlo Rendez-Vous.
That is the perspective of Wolfgang Wopperer, global head of retrocession business at Allianz Re, which is responsible for the group’s retrocession portfolio. He believes that some reinsurers face big challenges in this market.
“For the industry as a whole, the big challenges are weakening margins and too many reinsurers that do not have a value proposition beyond capacity,” Wopperer said.
He believes that the position of the market in relation to the overall cycle will be a big talking point at Monte Carlo this year. He is undecided around the extent to which market conditions have changed compared with a year ago and whether the cycle has reached its lowest point—but he does expect rate reductions will slow.
“It is difficult to say at this early stage, as it is not sure whether we have already reached the bottom of the market cycle. In any case, I would expect a slowing down of the market softening compared to last year,” Wopperer said.
“But where we stand in the reinsurance market cycle will be a talking point, as will potential mergers and acquisitions in the reinsurance sector.”
For buyers, however, the favourable conditions represent an opportunity as well as a challenge. Wopperer said cedants want to keep their partners happy while maximising the opportunities that market conditions present.
“From a buyer’s perspective, the challenge is to maintain relationships with strategic reinsurers and to provide them with the amount of business that keeps them satisfied,” he said.
He said Allianz has also used the favourable conditions in the reinsurance market in a positive way to close gaps in coverage.
“We have closed gaps in our covers by including business segments and territories which had not been protected before,” he said. “We did not buy more reinsurance, but more comprehensive coverage.” He noted that this applies to traditional coverage only; its involvement in ILS has been stable.
