Primed to respond
A more responsive, client-driven approach is needed to help build demand for reinsurance, according to David Booth, active underwriter, and Andy Caldwell, deputy active underwriter of Barbican Syndicate 1955.
There is no doubt that the reinsurance industry has undergone a period of extended pressure on pricing coupled with a steady push to bundle coverage and widen terms and conditions. In tandem with this we have also witnessed a marked decline in the amount of traditional excess of loss reinsurance purchased in some lines.
However, over the last year there has been a reassessment of the value that reinsurance brings, on multiple fronts, evidenced by a shift in demand for proportional and stop loss reinsurance. The challenge for reinsurers is how to meet the demand and at the same time satisfy profitability targets. This marks a critical point for the insurance and reinsurance markets, particularly given early signs of rate stabilisation on certain lines during the recent US renewals and a greater willingness on the part of reinsurers to resist demands for wider terms and conditions.
There is the potential for further market stabilisation over the coming months.
Reinsurer responsiveness to current market conditions and client demands is key to the market’s ability to bring about change. We need a more proactive approach in expanding our industry’s risk appetite through the use of enhanced data analysis. We also need to be willing to offer more bespoke, defined products where the complexity of risks demands this. We must look at ways to get closer to both the broker and the client, fostering relationships based on greater understanding which are beneficial for all parties. In short, we must strive to enable the nurturing of new insurance products through the provision of the necessary reinsurance protection.
“A more joined-up approach at all stages means we are better able to capitalise on the collective insight of all parties.”
This is no easy undertaking and will require considerable effort if we are to move forward effectively on all fronts. But the opportunity is clearly there to do so. The industry has, in some quarters, been accused of often saying ‘no’ too quickly where opportunities exist to reinsure new products to address emerging exposures. Cyber is a standout example of where the insurance sector has taken on new exposures, using analytical abilities to better understand potential risks, and creating unique products that address the multiple complexities underpinning this class. In turn this has created opportunities for the reinsurance sector, which has demonstrated its willingness to support this burgeoning market through proportional reinsurance.
We must proactively seek out other opportunities to provide new solutions that meet a genuine market need. Terrorism-related cover provides one such area of potential. The attack on a beach in Tunisia in 2015, in which 38 people were killed, unsurprisingly led to a number of holidaymakers changing planned trips to the region for alternative destinations.
Travel companies bore the financial burden of this as it was not something covered by existing policies. Clearly here is a chance for the insurance sector to step into the breach, with a well-capitalised reinsurance sector capable of supporting such a move.
Getting closer
We must also seek routes that take us closer to clients, no matter where they are located. However, this does not necessarily require a permanent on-site presence in every domicile to facilitate that close-quarter contact. There is the potential to capitalise on more effective and efficient distribution channels to facilitate broader and more direct market access.
At Barbican, we have long adopted a partnership approach to gain direct access to local markets. Working in tandem with experienced practitioners on the ground we have developed strong working relationships based on mutually beneficial arrangements where we benefit from their market insight and client network, while they can take advantage of our expansive suite of products and expertise to broaden their insurance offering.
We must also respond to the evolving insurance and reinsurance-buying habits of clients. Every effort should be made not only to enhance the delivery system but to remove wastage or repetition, ensuring that every stage in the process is fully optimised.
At the core of this is a drive to achieve better alignment between all parties to the coverage—insurer, reinsurer, broker and client. A more joined-up approach at all stages means we are better able to capitalise on the collective insight of all parties, to provide a more responsive and relevant end product which is delivered through the most effective and efficient distribution channels. Only once we have achieved this, can we say we are truly primed to respond to market opportunities.
David Booth is active underwriter, and Andy Caldwell, deputy active underwriter of Barbican Syndicate 1955.
