Pricing volatility properly is critical for reinsurance stability, says Echo Re CEO Pütz

Long-term discipline and diversification must guide the market if it is to remain resilient.

KEY POINTS:
Cycles demand long-term discipline
Diversification drives true resilience
Capacity is no longer scarce

Fabian Pütz, CEO of Echo Re and executive board member at DEVK Re, warns the sector not to fall back into short-term cycles of overcapacity and underpricing.

“We seem to be approaching the end of this hard market phase,” he told Monte Carlo Today. Results for reinsurers in the past two years have been “quite favourable,” but available capital is back at record levels. “Capacity as such is not a scarce resource for most segments.”

“We have a crucial role to play in adequately and consistently pricing for risk.”

Pütz also highlighted rising competition on the broking side. “Winning and defending tenders is certainly a key aspect, and getting favourable structures in terms of pricing and conditions placed in an attractive way for the cedent is driving expectations.”

For Pütz, the risk lies in the pendulum swinging too far. “Making short-term gains at the expense of other parts of the value chain could backfire sooner than we all think. We need to find a market level which works longer term, because risk and volatility are there and they need to be faced.”

He calls on the industry to take responsibility in pricing volatility properly: “We have a crucial role to play in adequately and consistently pricing for risk and giving the right incentives to societies and political decision-makers. 

“If we don’t do this and the pendulum swings again, I don’t see us being resilient and coming out of the hard market in a more sustainable way than in previous cycles.”

Over the next 12 to 18 months, Pütz sees fragility rather than strength, but noted that catastrophe events could easily change the outlook. He expects competition to rise, and insists DEVK Re and Echo Re are well placed. “I’m not afraid of competitive pressures, because I see that the values we’ve conveyed in the way we build portfolio and relationships adds resilience.”

That portfolio strategy is built on discipline and diversification. “Our mandate is not to write for the sake of premium growth, but to add value to the group’s exposure,” Pütz stressed. “We aim to run a portfolio which feels sustainable and profitable over the cycle, choosing the right portfolio composition with the right partners and driving diversification.” 

DEVK, a German mutual insurer with nearly 140 years of history, entered reinsurance 25 years ago. Today, its two reinsurance carriers, DEVK Re and Echo Re, write around €1.5bn of premium between them, about a quarter of the group’s €5.8bn revenue.

Both entities, Pütz explained, “are 100% complementary reinsurance carriers in the way they write business,” with DEVK Re covering Europe, Israel, Turkey, and North America, while Echo Re focuses on Latin America, Africa, the Middle East, and Asia-Pacific. “There is no portfolio overlap from a regional perspective.”

Echo Re, headquartered in Zurich, has grown into the group's hub for specialty underwriting talent, adding agriculture, affinity, engineering, marine and energy lines since 2017. “Zurich is the melting pot of reinsurance in continental Europe, offering opportunities to access underwriting talent. This has driven portfolio diversification tremendously,” Pütz noted.

At a logistical level, he emphasised efficiency over complexity. “We intend to steer the organisation in a lean and effective way, keeping organisational complexity low but portfolio transparency high.”

Echo Re has doubled its portfolio in recent years while onboarding new clients without significantly increasing headcount. The key, he explained, has been process automation: “Sometimes it’s really the down-to-earth process integration and automation that makes more than 80% of productivity gains possible without investments in artificial intelligence.”

The key is having a “very nimble and efficient setup is the springboard” for further scaling of the portfolio. Echo Re and DEVK Re will continue to share best practices and align processes “not to reduce costs, but to fulfil our strategic mandate step by step.”

As reinsurers meet in Monte Carlo, Pütz’s message is clear: sustainability over opportunism, resilience over volume. “Our members don’t expect us to deliver return on equity in the high teens or 20s, but we also don’t need to feel guilty for underperformance of the sector in prior years or making such returns. 

“What matters is using our capital in a diligent way, earning the cost of capital over the cycle, and aligning interests across the value chain.”

Fabian Pütz is the chief executive officer of Echo Re and executive board member at DEVK Re. he can be contacted at: Fabian.Puetz@echore.com

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