Allianz struggles to manage expectations of US reinsurers
A decrease in Allianz’s exposure to US risks, combined with its steady use of capital markets risk transfer tools for those perils, means the insurer is finding it increasingly difficult to keep its traditional reinsurance partners happy in this market, according to Wolfgang Wopperer, global head of retrocession business at Allianz Re, which is responsible for the group’s retrocession portfolio.
Wopperer said that Allianz is close to the capital markets, for US perils especially. But as its global risk profile has changed, this has changed its appetite to buy risk transfer products related to peak US perils. He adds that it certainly has no capacity to consider working with new entrants into this market.
“We see a strong presence of the capital markets above all for US cat risks,” Wopperer said. “Our exposures in the US have continuously decreased over the last few years and, as a consequence, we purchase much less US cat capacity today than five years ago. It is a challenge to match this with the expectations of our existing US cat reinsurers and we see no space to accommodate lines for new entrants.”
He said that Allianz will buy an unchanged amount of reinsurance in this renewals season—as it did last year. “Our strategy regarding reinsurance purchase has not changed,” he said.
He said negotiations in Baden-Baden will be more direct and focused than those in Monte Carlo. Attendees have a better sense of what they want to achieve from the event and where the industry is in terms of pricing.
“Baden-Baden is later in the year. At that time, people know better where we are in the market cycle and have concrete ideas of how their programmes should look in the next year. As a consequence, discussions in Baden-Baden are more focused than in Monte Carlo,” he said.
But he also believes discussions will vary little compared with the 2013 event. The main talking points will revolve around price and terms and conditions, and the health and position of the industry more generally.
“Potential extensions of the coverage scope and where we currently stand in the market cycle with all its consequences will be the main talking points,” he said.
Wopperer said in an interview in Monte Carlo that it was difficult to say whether the industry had reached the bottom of the market cycle. But he said he would expect a slowing down of the market softening compared to last year.
Allianz is one of a number of insurers that have overhauled their buying strategies in the past decade. Its reinsurance programme is almost completely global in scope, it has a defined risk appetite and it continually monitors the counterparties it uses.