A good routine based on trust: Baden-Baden attendees
Consolidation and yet more mergers and acquisitions (M&A) in the industry will be the biggest talking point in Baden-Baden this year, closely followed by negotiations over rates and terms and conditions, according to an online survey carried out by Intelligent Insurer ahead of this renewals season.
Some 40 percent of respondents said M&A will be the hottest topic, while 30 percent said they expect it to be negotiations over rates and terms and conditions. A number of executives also suggested that regulatory changes, alternative capacity and insurtech would dominate discussions.
There have been yet more big deals in 2018 with AXA swooping for XL, AIG buying Validus and Markel acquiring Nephila Capital—all deals in which accessing alternative capital appeared to be a contributory factor. Respondents to this survey seemed concerned about M&A for a number of reasons, including the increase of concentration risk in reinsurance panels, and the fallout from deals in terms of talent moving around.
“Every time there is a new deal, we have to do a load of work assessing what that means for our counterparty credit risk and whether we need to adjust the shares of the reinsurers we use,” said one respondent.
“Especially in the middle of negotiations, that can be a real pain. I wish these companies would do deals only in the first half of the year and everyone else would stop creating rumours.”
Baden-Baden has thrived based on the deep relationships that exist in the industry and the potential breakdown of these also seems a concern for some players. One respondent described how M&A had led to his main point of contact at a reinsurer leaving—and he is exploring other options as a result.
Another offered more sentimental reasons: “I have been coming to Baden for 20 years and have made some excellent friends who I meet here every year,” he said.
“It is a routine, but a good routine built on trust and years of a two-way relationship. Going for dinner with these upstart reinsurers or ILS guys is just not the same.”
These sentiments were also present when we asked delegates why they attend Baden-Baden. Thirty-one percent said it was to reaffirm relationships with clients in a relaxed environment; 26 percent said it was to learn new things and gain an understanding of trends.
There certainly seemed even more sentimentality in some of the reasons respondents gave. Several mentioned the fact that Baden-Baden is a lovely town to spend a few days in—albeit while engrossed in tough negotiations some of the time. On this note, some 10 percent said they go there simply for a pleasant break from the office.
“Autumn in the Black Forest is lovely, plus I love the restaurants and the bars and the town’s other delights,” said one respondent. Another added that it is his wife’s favourite trip of the year: “She spends the day in the spa or shopping, then we go for dinner. It’s much nicer than Monte Carlo, which is just too hectic.”
Plenty of respondents were business-like in their approach. Several noted how it allows them to see many clients in just a few days in a way that would not be possible otherwise.
One said: “We go in order to reaffirm relationships but also to negotiate next year’s reinsurance treaties with existing reinsurers in a very speedy and efficient way. The ‘relaxed environment’ is a side topic, and a bonus.”
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