The reinsurance industry should remember that its core role should be to act as a shock absorber, able to help insurers better manage volatility. Their mission is to manage this volatility rather than run away from it—and their clients need that more than ever.
That is the stark message that Wade Gulbransen (pictured), head of North America, TigerRisk Partners, offers ahead of the annual APCIA conference as the markets grapple with challenges on many fronts and a hard market only likely to get harder in the aftermath of Hurricane Ian.
He believes TigerRisk is well placed to help. “Tiger hurtles towards challenges such as this, which are also opportunities,” he told Intelligent Insurer.
“We have had the perfect cocktail of challenges hitting the industry from all sides: from inflation to geopolitical uncertainty to many years of attritional cat losses to uncertainty over the impact of climate change. And now we have Hurricane Ian. But in times like these, insurers look to their brokers, and we are ready to respond.”
TigerRisk has been looking to get on the front foot in a property-cat market characterised by tightening capacity and hardening rates for several months. In September, at the Monte Carlo Rendez-Vous, it unveiled a so-called SWAT team, dedicated to identifying new sources of property-cat capacity.
The logic is sound: in the context of hardening rates, now is a very good time to invest in property-cat business. The challenge is simply explaining the opportunity to investors in a way that cuts through the wider noise of macroeconomic challenges including inflation and rising interest rates, and to get deals done in time for the year-end.
While it’s too early to assess the impact of Hurricane Ian losses on cat capacity, Gulbransen says that TigerRisk has made good progress, but there is still a lot of work to be done in order to find capacity and solutions for clients. It is not an easy job, he admits, but he has a determined team.
“We have pulled together an incredible group of people, from our capital markets, analytics and reinsurance teams, who are able to talk to investors about bringing capital to our end clients, factoring in all the multiple different nuances depending on business line,” he said.
“There’s no doubt this is a challenging time. The current market dynamics are extremely demanding and that is having an impact on some investors and how they redeploy capital. Many are waiting to see how the rest of the year plays out in case there are any events—such as Hurricane Ian—that may further trap collateral.”
Rod Fox, executive chairman of TigerRisk, agrees that it has been hard—but also that the company has had successes. And he agrees that the key to the process is bringing together the different disciplines.
“We’ve taken reinsurance people who are world-class underwriters, bankers, and ILS experts, and brought them together to scour the globe for the capital to bring to bear for our clients. We have had success with that, and I think there is more to come. The market was already hard, but it is only going to get harder in the aftermath of Hurricane Ian,” Fox said.
“We’re going to see capital starting to come back into the property-cat space, so it’s not all doom and gloom. And we have a world-class team of people thinking about this for our clients every day now.”
“Many are waiting to see how the rest of the year plays out.” Wade Gulbransen, TigerRisk Partners
That holistic approach makes all the difference in market conditions such as these, Gulbransen adds. He believes TigerRisk is unique in its ability to tackle this challenge.
“We’re the only full stack or holistic broker with a full banking unit that’s dedicated to this space,” he said. “That combination of banking and broking at TigerRisk is particularly powerful—it allows us to provide a more tailored approach in delivering a solution to a client, as well as addressing any investor concerns.”
In terms of the “holistic” approach, Gulbransen clarifies that nothing is off the table. TigerRisk has a strong track record in the legacy space. “Legacy is no longer about distressed books—it is about structured transactions that free up capital, which against the backdrop of the current market cycle can then be deployed into new business opportunities at improved rates and terms,” Gulbransen added.
“We are always looking for ways to allow our clients to unleash more capital.
“That may allow our clients to take advantage of what will be a fantastic market. And while releasing capital continues to be a primary driver for insurers, more people will be looking for creative ways to free up their balance sheets and efficiently utilise their capital. That is true holistic thinking.”
He re-emphasises the notion that challenges also present opportunities—and these are something the market should run towards, not away from. “I do think that the market dynamics after a larger event present opportunity. Some investors will understand that this is the time to jump in. That is why I’m bullish. We’ve done the hard work; we’ve had the discussions. They will mean opportunities,” he said.
“I agree that the different components of our skillset give us that edge: reinsurance, the capital markets group, our deep strategic advisory capability. Our job is to make clients more successful. We achieve that by taking this holistic approach and that can work extremely well in this complex market,” Fox added.
Gulbransen stresses that this is not a new approach for TigerRisk. Its success has always been based around innovation and offering a different approach, he says.
“I honestly believe our success is a direct result of our extremely talented professional staff, brokers and advisers. They have decades of experience of trading, negotiating and educating when times get tough. Tiger has always found a way to get deals done.
“We recognise that reinsurers need to make an appropriate margin over time to attract investment and maintain high quality ratings. This market needs both buyers and sellers, and the market has to be one where the sellers can thrive too.
“We bring innovation to the market, we bring risk-takers and clients together to execute unique transactions. That’s a lot of hard work but looking at the team we have, I am very optimistic about the future,” he said.
“Insurers and reinsurers are not looking for less creativity and innovation—they want more. They don’t want off-the-shelf products, but instead are seeking customised solutions that fit their unique needs,” he explained.
“Our tactic now is to bring a holistic approach to the deal-making process, by leveraging the talent we have across the various parts of the business. Teamwork is our secret sauce. And when you add a unique culture to a strong ethos of teamwork, that results in dynamic success.”
He cites a number of unique and innovative risk transfer tools that TigerRisk can take credit for. One is what is known as a Reciprocal Exchange, which has become increasingly utilised by programme managers and insurtechs, helping to transform the managing general agent (MGA) business model by allowing MGAs to take further control over their capacity while continuing to drive fee income.
“We are the only advisor in the space that has the ability and expertise to bring this highly innovative structure to the programme market,” Gulbransen said.
Tiger has placed many unique aggregate coverages for clients who might have found such coverage challenging in the past. “Some of these are innovative yet simple products. Yet they solved a problem for a client,” he concluded.
“Regardless of which line, inflation is unequivocally on everyone’s mind.”
Inflation and other challenges
One of the biggest challenges facing the markets is inflation. Insurers are trying to get a handle on what it means for all parts of their business—and reinsurers are asking tough questions. They want the analysis to have been done so they understand the potential impact on coverage.
“Inflation is a topic for all parts of the market. It affects the underlying risk,” Gulbransen said. “Clients are trying to get their arms around exactly what it means for them. What should be the right values for properties they’re insuring? How does this impact their risk tolerances?”
But, he says, it can be very difficult for clients to forecast. The impact of inflation on various lines of business will be completely different. In casualty lines, the impact will be very different from the effect on property. “But regardless of which line, inflation is unequivocally on everyone’s mind. There’s no doubt about that. It’s certainly a topic that everyone is trying to wrestle with,” he said.
Another issue, in part linked to inflation, is the recent foreign exchange fluctuations. These are especially unhelpful for European reinsurers. “Traditionally, European reinsurers have stepped up in tough times They have strong balance sheets and abundant capacity, but the foreign exchange is having a negative impact on what they can write in dollars,” he said.
This has been exacerbated by uncertainties in the global macro economy as well as some hefty mark-to-market losses on the investment portfolios, which has impacted everyone in the reinsurance industry. “The market dynamics are impacting not only reinsurers and investors, but our clients as well,” Gulbransen explained.
That said, the current market conditions play to TigerRisk’s strengths and its ability to offer services and advice across multiple lines, geographies and customer segments. “TigerRisk has the right people working together to solve our clients’ issues,” he said.
APCIA 2022, TigerRisk, Hurricanes, Inflation, Capacity, Catastrophe, Climate Change, P&C, Insurance, Reinsurance, Wade Gulbransen, North America