Industry must innovate through critical period of change
In what is a critical time for the industry, re/insurers must innovate to navigate the challenges ahead, Franz Josef Hahn, chief executive officer of Hong Kong-based reinsurer Peak Re, told SIRC Today.
Hahn said that the market hasn’t changed much since conferences such as Baden-Baden earlier in the year, where Peak Re introduced a new team operating from its new office in Zurich.
He said that Peak Re was no longer regarded as a new player in any market. “We have passed that point. The market recognising us and accepts what we have to bring to it in terms of expertise and innovation,” he said.
For the industry as a whole, however, he said it is a critical time for a number of reasons, including the very soft rates and overcapacity the market is grappling with.
“I see some difficult renewals ahead at January 1 due to the softness of the market and the amount of capacity that still remains in it,” Hahn said.
This is less of a challenge for Peak Re, he claimed, due to the nature of the company, its deep relationships and the added value it offers clients.
Hahn said that he understands the value of innovation but he also stressed it is important to have a clear understanding of what exactly is needed in this area.
According to Hahn, innovation needs to be functional. He said that Peak Re has avoided some of the silos of some other re/insurers, which gives the company an important advantage over its rivals.
He also stressed that when it came to innovation and creating new products it is vitally important to look not just at the needs of the customer—the insurer ceding a risk—but also at the needs of their ultimate customers.
Hahn stressed that with insurance penetration levels in the Asia-Pacific region as a whole so low, insurers need to look carefully at what they insure and where, picking markets and products carefully.
“You need to look at the products available and again at the needs of the client. The Asia-Pacific region is a vast area with so many diverse pockets of potential insurance that can be accessed by companies,” he said.
He said China remains an interesting market and added that some insurers are looking into accessing the lower strata of the market, as insurance becomes more widespread. This is especially true given China’s vulnerability to natural catastrophes such as windstorms.
Peak Re partnered with the Shanghai Typhoon Institute this year to look at tropical storm activity over the Western North Pacific Basin and South China Sea. The research obtained so far shows that 2014 and 2015 saw a slight drop in the number of typhoons making landfall, with six being recorded for each year so far—well below the 10-year average of eight.
On another positive note, Hahn also said more clarity was merging around the losses stemming from the Tianjin explosions in August. Now that more information had been obtained, the incident is no longer as much of a concern for Peak Re. “The losses are not as bad as was first feared,” he said.
