Zurich to cut 20 reinsurers from its panel

Zurich Insurance’s reinsurance partners will “feel the bite” this year as the insurer reduces the size of its reinsurance panel, Paul Horgan, global head of group reinsurance at Zurich Insurance, told Monte Carlo Today.

Horgan said that as market conditions continue to soften, the company must reduce costs and access new capital where possible, resulting in a reduction of the number of carriers it will work with.

“We’ve been talking about having preferred partner relationships for a few years, but this is the year when it’s going to start to bite. We’ll be reducing our panel by about 15 to 20 carriers. The panel will still be well over 30 strong, but it is going to come down significantly,” Horgan said.

He said the move is partly driven by tough market conditions in Zurich’s own business.

Although the decline in rates was slowing, action was still needed in terms of cost-cutting.

“We don’t think the market’s softening will be as soft as in prior years, but there’s tremendous pressure on us to continue to lower our reinsurance spend,” he said. “So we’ve worked with our brokers to work out what are more efficient ways to buy.”

Zurich will look to protect its relationships with its core carriers—but at the expense of others, which it will cut completely. Horgan said spend with these core partners may be reduced by just a couple of percentage points but he is hoping to keep spend with them consistent

“For some of our core carriers—we have eight to 10 of those—we try to keep them on a consistent spend,” he said. “For others that are less important, they might see some level of reduction. We just can’t afford to keep the smaller carriers that are on with 1 or 2 percent lines with us,” he said.

“I think the challenge is trying to match the capital with where the risks are today. Everyone is talking a lot about cyber and ‘Industry 4.0’. We’re very interested in it and so are our customers, but we haven’t really locked a product down that addresses our customers’ needs.

Until we get that right, we’re not going to be able to unlock that capital.”

Horgan revealed that the company is also engaged in a number of pilot schemes with brokers and customers in an attempt to better understand their supply chains.

“We’re also using technology companies to analyse unstructured data to help us identify bottleneck problems and unlock these risks,” he said.

“Another area that we’re very interested in is how to utilise facultative reinsurance more efficiently. There are products in our portfolio where either we don’t have the pricing right or we don’t have the capacity—but we want to do that in an efficient way.

“We’ve always been very treaty-focused, but we think this is the right move for Zurich.”