Reinsurers can learn from ILS
New risk transfer products using structures underpinned by the capital markets and particularly the insurance-linked securities (ILS) community have represented the industry’s key source of innovation in recent years, Brian Secrett, chief underwriting officer at Tokio Millennium Re (TMR), told Baden-Baden Today.
Secrett pointed to new products that have been placed in the capital markets to cover gaps in the existing traditional solutions offering.
“We are seeing a lot of innovative work taking place,” Secrett said. For clients who have identified risk they prefer not to carry on their own balance sheets, but know it would add value to their product offerings, innovative reinsurers are helping to develop products and risk transfer solutions that respond to that type of risk, he explained.
New product structures have been created using new means of transferring risk, Secrett noted. Reinsurers can learn from the different structures that are used in the ILS community and develop traditional reinsurance products that respond in a similar way, he suggested.
“Access to ILS capital markets is a feature of ensuring that product development is at the leading edge in reinsurance,” Secrett said. “We will see a good deal of product development, a lot of which is sponsored out of some of the different ways of transferring risk in the capital markets.”
As reinsurance capacity supply and demand has barely changed during 2018, Secrett does not expect much price movement for the 2019 renewals. “In many lines of business, we are already at a pricing floor,” he said.
“Capital may no longer be available to deploy at pricing terms or coverage which are weaker than those currently available,” he added.
Secrett believes TMR is well prepared to compete in the current environment. “TMR has matured from being a monoline cat player into a client-focused, global specialist reinsurer,” he said.
The reinsurer holds a maturing portfolio of core business in professional liability, cat business, credit, marine and energy, and in general casualty. In some other areas such as agriculture or environmental liability TMR has portfolios that it considers to be ‘in development’.
“We intend to grow profitably in specialist areas alongside the client base,” Secrett concluded.
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