Deutsche Rück sets itself apart from the rest

Deutsche Rück sees itself as one of the few reinsurers that are not under growth and profitability pressures, and is confident that the current difficult operating environment can and will be overcome, chief executive officer Arno Junke, told Monte Carlo Today.

Neither Deutsche Rück nor its capital providers, primary insurers, are listed, allowing the German reinsurer to keep out of the daily news frenzy and public discussions and putting it in a unique position, Junke explained at the Rendez-Vous in Monte Carlo.

“We don’t have growth targets and we have an ownership structure that does not demand return on investment levels similar to listed companies,” Junke said.

Deutsche Rück grew gross written income by 3 percent to €1.08 billion ($1.21 billion) in 2015 and generated a net income of €14.3 million ($16 million) primarily focusing on the German market. Deutsche Rück provides cover for mutual insurance companies, cooperative insurers and stock companies, Junke said.

Large reinsurance players are claiming in Monte Carlo that they cannot afford rates declining further in the upcoming renewals season as it would squeeze profitability and potentially push it below their cost of capital.

Junke is aware of the pressures the reinsurance market is facing due to low interest rates and a soft market, but he thinks there is no need for market players to keep discussing the challenges they are facing publicly.

Furthermore, he criticised smaller reinsurers which are constantly reinventing their business models.

“If they need to do that it is because they don’t have any,” he noted. He particularly criticised the business model of hedge fund reinsurers which, in his opinion, understand themselves as a capital collecting machine which claims to be able to earn quick money.

“This is extremely unsexy, because with this statement, they won’t be able to convince their clients,” he explained.

He also highlighted the fact that brokers are pushing prices down for their clients but reinsurers have to pay the brokerage fees. “This is absurd,” he noted.

He believes, however, that the industry will find sensible solutions for any problems it is facing as it is, and has been in the past, extremely resilient.