Coping with COVID-19—UnipolRe stands apart from the crowd

The re/insurance industry is grappling with a confluence of disruptive forces and events, the likes of which it has not seen in its long history. Several years of severe losses topped by losses and uncertainty as a result of COVID-19 are putting upward pressure on rates and triggering difficult conversations about the parameters of coverage.

These negotiations also take place against a backdrop of restrictions on travel and face-to-face contact in most countries. The industry now operates in the virtual realm of Zoom and via videoconferencing calls.

This presents is own challenges, but Simon Wigzell, UnipolRe’s chief underwriting officer, stresses that the reinsurer was better prepared for this than many others.

“We have always operated remotely to some extent and we invested in the technology and processes to enable us to do that from the start,” Wigzell says.

“So when lockdown occurred and the way the industry communicated changed overnight, we were probably better prepared than most.”

In fact, Wigzell says, it has been an extremely busy period for the company. As rates have moved upwards and the appetite of reinsurers changed, cedants have been increasingly keen to speak to UnipolRe for advice on their buying strategy.

“Although we are a relative newcomer the company’s ethos of offering impartial advice sets us apart,” Wigzell says.

“Through that philosophy, we have found a unique way to stand out: by leaning on the experience of our senior executives and prioritising the exact needs of buyers—even if this means advising them to buy less reinsurance.”

“As the re/insurance industry enters its first true hard market in almost two decades, all reinsurers are re-examining their priorities and what sets them apart. In our case, it is easy to fall back on the very reason we were formed.

“We can simply remind cedants of our values and our unique offering. We were formed by executives who had previously been buyers—and that offers us a unique perspective to help clients with their needs.”

​“We are very transparent and offer a purely technical opinion.” Simon Wigzell, UnipolRe

Innovative from the start
UnipolRe, formed in 2014 by Italy’s Unipol Group with with €500 million of dedicated capital, is spearheaded by executives with reinsurance buying central to their CVs.

Chief executive Marco Sordoni is still the buyer for the Unipol Group, placing some €1.9 billion capacity annually. Wigzell, in addition to gaining many years’ experience in the London Market, was previously the reinsurance manager of the Fondiaria Sai Group of companies.

Wigzell says that the ability to see the buyer’s perspective has been central to the company’s philosophy and the way it operates. This approach, combined with the company’s strong technical and analytical abilities, has led to its becoming a trusted partner on programmes.

“We knew that as a newcomer to the industry, we would have to be different, we would have to be innovative, from the start,” he says.

“Our experience on the buying side aided this approach and still does today. We work closely with many of our clients, looking at the structure of their programmes and the most efficient way they might structure their reinsurance,” he adds.

“That is unusual for a player of our size, but it means we have very deep relationships with our clients as a result.”

A seamless approach
One way this attitude translates into reality is how UnipolRe offers clients holistic solutions, encompassing all their lines of business, as opposed to working in silos. Wigzell explains that the reinsurer always prefers to write across an entire programme, rather than picking and choosing certain layers or lines of business.

“We don’t simply talk pricing on individual layers, we discuss areas where we can mitigate pressure across an entire programme. The bigger reinsurers have different teams for different lines of business, but by seeing the whole picture, we can participate on marginal programmes by subsidising them with another part of the business,” Wigzell says.

“We analyse the total ceded profit rather than individual lines, so we can cross-subsidise performance as required.”.

When he worked on the buying side, Wigzell learned that the overall profitability on globally ceded programmes often outweighed individual undertakings. On this basis, picking and choosing lines on a programme reduces diversity and can lead to losses where certain lines do not perform well.

“We are one of the few reinsurers that truly look at things in this way,” he says.

UnipolRe is unusual in that its underwriting, actuarial and risk management teams work as one unit, offering clients a seamless service. He says that allows the company to offer advice and analytics in a fairly bespoke way—and it can sometimes lead to the suggestion that clients should be buying less coverage.

This is partly because of an innovative capital management tool the reinsurer has developed. Smart Capital Management Solutions (SCMS) has been developed in recognition of the growing importance of capital optimisation within companies, especially since Solvency II came into force, and the increasing complexity of capital management strategies.

Wigzell says that capital efficiency is increasingly a differentiating factor in the reinsurance marketplace—but this often causes brokers and reinsurers a conflict. If a cedant buys less coverage, they get paid less.

For UnipolRe, however, as a smaller player on most programmes, this is less of an issue in contrast with the benefits of gaining the trust of a client.

“We are very transparent and offer a purely technical opinion,” Wigzell says. “We have a much closer rapport as a result, which is very positive.”

In the context of the hard market, he says he is expecting a slow swing towards improved pricing that should last for four to five years. That is partly because of the multiple factors driving harder rates apart from COVID-19 losses, including several years of cat losses, low interest rates and depleted reserves.

“Competition will gradually increase as rates move up but I believe the improvement could last for several years,” he says. 

A people business
UnipolRe is a great advocate of the use of technology and analytics, but Wigzell stresses that in spite of the increased use of automated solutions in the industry, it remains a people business.

“Better data and analytical tools are fantastic, but reinsurers still need the right people to interpret and use that information,” he says.

The reinsurer has an advantage in this area because of its close links to its parent in Italy. As technology transforms elements of the primary side of the business, its parent is very close to the ground on such trends and can feed its reinsurance arm what is likely to happen in the future.

“One of the advantages we have is that our parent has its ear to the ground on the direct market and we can translate a lot of that information for the benefit of our cedants.

“Reinsurers are almost the last in the chain of risk and thus often the last to find out about new trends. We are ahead of the game, however, because of our parent,” Wigzell says.

UnipolRe’s technical knowhow was helpful during lockdown restrictions imposed around COVID-19. As a relatively young company, a high level of connectivity and remote coverage had existed since its establishment so UnipolRe enjoyed a smooth transition to working remotely during the pandemic.

“We feel we interact with our clients more than ever, both internally and externally,” Wigzell says.

“With an Italian parent, we had advance warning around what was coming and we were able to act early—before lockdown even happened in Ireland.

“We are a small, agile and flat organisation—things that all stand us in good stead,” he concludes.

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Simon Wigzell is the underwriting manager at UnipolRe. He can be contacted at: simon.wigzell@unipolre.com