PartnerRe refocuses as pure reinsurer
PartnerRe has dropped its aspirations of building a major primary business and is refocusing as a pure play reinsurer, Charles Goldie, head of speciality lines at PartnerRe Global, told Monte Carlo Today.
Goldie said the business has settled on a new focus under its new owner Exor, the Italian investment company that completed the acquisition of the business last year. Goldie said the new focus is based around two things that set the reinsurer apart.
One of these is its move away from primary business although it will retain some existing small niche direct business. Goldie stresses that the company will not compete with its clients going forward and will only focus on supporting cedants as a pure play reinsurer.
“The old PartnerRe had started build-out primary operations and had launched PartnerRe Wholesale but we are moving away from that,” he said. “We don’t want to compete with our clients. That is not comfortable for us.
“The primary side was still in its infancy but I believe it is tough for reinsurers to move into primary business. It is a different orientation. We are going to stick to what we are good at.”
The second distinguishing factor that will set it apart, Goldie said, is the fact it is now privately owned. This means it does not have to undergo an interrogation of its results every quarter by analysts and shareholders, allowing it to plan longer term and take on more volatility in the risks it underwrites.
“Public companies have a lot of earnings pressure, they have very short-term goals and they can’t cope with volatility on their earnings,” he said. “The fact that we have a shareholder with a long-term vision means that not only do we not have that but we can help our clients manage it.”
Goldie said there are three reasons for cedants to buy reinsurance. First, to protect their capital, second, to protect their short-term earnings or third, because it is cheap.
“We will always be a player on the first reason but the protection of earnings volatility could be a big growth area for us,” he said.
“We can withstand the sort of volatility our clients cannot. We are still seeking growth but we can look on a longer term basis and set very different goals.”
Goldie admits rates remain challenging in most areas of the specialty lines he is responsible for. Because of that, he is realistic about growth and said he is more focused on building the right teams and infrastructure able to select risks effectively.
“If the market turns, life is easier but I have to build a business that is efficient and works if things to do not turn,” he said. “It is very possible that it will be a low margin business for some time and we have to work on that basis.”
He added that a big loss in itself will probably not be enough to turn the market because there is so much capital willing to move in. But a loss that is unexpected would create a reaction. “If a category 5 hurricane hits Miami, the risk modelling agencies predict a $100 million loss; if it came in at $97 million, the market would not react,” he said.
“If a category 2 hurricane hits Miami with an anticipated loss of $30 million which turns out to be close to $100 million, that is very different. The market will turn based on fear—not the size of the loss.”
