16 September 2014 News

Reinsurance now an attractive form of capital

As insurers in the EMEA region seek to manage their capital base more strategically, reinsurance is increasingly presenting itself as a useful form of capital. This presents a big opportunity for reinsurers, according to Eric Paire, head of EMEA Strategic Advisory for Guy Carpenter.

“We are seeing clear bifurcation,” he said. “On the one hand reinsurance in Europe is more and more commoditised; there are more players, and there is more capacity. The challenge there is purely about efficiency, pricing and responsiveness.

“However, what people forget to talk about is that at the same time insurance groups realise that reinsurance is a very attractive form of capital. This may not be discussed by the reinsurance buyers, but at board level reinsurance is being seen as a valuable complement to debt and equity.”

Another area of opportunity in the EMEA region is the trend for governments to push risks that were previously uninsured or managed by state schemes into the private insurance and reinsurance market.

“That’s true for risks such as flooding in countries that do have state schemes, it’s clearly true for terrorism and it’s probably true in the more medium term for some of the emerging risks like cyber.

“It means you have to play at two levels—you have to be very good on the day-to-day execution of a very competitive product and you have to project yourself with something more strategic,” Paire said.

He said that cyber presents a particularly attractive area for product development in Europe because a great deal of emphasis is placed on data privacy in the region.

Another area ripe for development is life reinsurance.

“Life reinsurance is currently a bit left behind in terms of innovation. There is potential to provide better capital efficiency and make life insurers more competitive. That is why we are jointly developing in Europe our life and strategic advisory operations.”

Paire added that strategic advisory capabilities will become an increasingly important complement to brokers’ traditional capabilities.

“We want to develop the two sides of the broker’s brain, one being execution and placement, the other being more strategic thinking and conversations with clients which are linked with all these new opportunities.”

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