SCOR in strategic shift to increase US and UK presence as market becomes ‘more disciplined’
SCOR is set to up its game in the US and UK markets in a shift of strategy that has previously seen the French headquartered reinsurer voluntarily keep a relatively low profile in these markets.
Umberto Gavazzi, deputy chief executive officer of reinsurance business at SCOR Global P&C, told Intelligent Insurer that the change in focus had come as the reinsurer sees opportunities to grow in these large and significant markets as pricing has become “more disciplined”.
“Over time we voluntarily kept our presence in the UK and the US underweight compared to our worldwide market share. That was because these markets are super complex, and that’s fine, but economic conditions were not exactly where we would have liked them to be, so we adopted a very prudent approach in both the US and the UK,” Gavazzi explained.
He said that the reinsurer has a presence in these markets and has grown there before, but added: “We don’t enjoy the position that we have in other mature markets, for instance in Europe, Japan, and Australia.”
Explaining the shift in strategy, he said: “Now that circumstances are improving—direct and primary conditions have been improving since last year, and the reinsurance market is becoming more disciplined—we think we will pick up on those two markets.
“With these markets being so large, even a relatively modest growth will contribute quite a bit on our overall plan.”
“Even a relatively modest growth will contribute quite a bit on our overall plan.” Umberto Gavazzi, SCOR Global P&CNew ‘fast-growth’ group
Gavazzi pointed to another “more exciting” area of growth that has led SCOR to reorganise its business. This is a strategy to grow business in emerging markets or, as SCOR will call them, “fast-growth markets” with more dynamic economies—Latin America, Middle East and Africa, South East Asia—although he admitted that they can be “a mixed bag”, even though they are growing faster than European or North American markets.
“The fast-growth markets are where we enjoy very good positions with offices, branches and subsidiaries virtually everywhere. We have local teams who are very knowledgeable about the market, and we have an offering of services that is very well adapted to clients in those markets,” he said.
“They don’t require the same things as clients in North America, UK and continental Europe. They need services, they need technical advice, they need small capacities, they need reinsurers that are local and listening to them, and we are pretty good at doing this.”
But, Gavazzi said, SCOR wanted to make its offer to these fast-growth markets even more efficient. To do this, the reinsurer has unveiled plans to group together all these emerging markets into one region.
“All those markets will be sitting under one umbrella at SCOR, under one management. And for all those client needs that are very similar across those geographies they will be served much more efficiently, the same way.”
In a sense the reinsurer moved quite quickly on this, he said, but it was a natural evolution of what the company had been doing over the years, as it segmented clients’ needs to differentiate its offer better.
“Segmentation can be a very exciting, interesting exercise but can remain very theoretical. Over time we have managed to focus it on what matters to our clients most and we eventually found out that with two segments you are good,” Gavazzi explained.
He said that clients in mature markets, the sophisticated markets with large clients, don’t need a reinsurer to teach them how to do insurance because that is their job.
But these clients do need reinsurers because reinsurers have a strong balance sheet and good ideas of how to protect their solvency and capital better, perhaps with non-traditional solutions.
Fast-growth markets are different, he said.
“They need help to do their business. They are not that knowledgeable in all products, they need you to develop new products, so you bring them best practice, what you’ve seen working well in other markets. It’s great added value for clients in those emerging markets.
“We were doing this already, but we had buckets of those emerging market clients in the three regions. Now we have simply grouped them together to put them under a unique management.”
“They need you to develop new products, so you bring them best practice.”A full catalogue
Geographical growth and market discipline are not the only areas creating a stir at SCOR. Gavazzi said that as a global reinsurer the key to success is to be seen as a global partner by clients, something he clearly feels SCOR does well.
“We need to be able to offer the whole spectrum of products to them. It’s difficult to be hyperselective and focus on one or other line of business because we need to have a full catalogue to offer to our clients.
“In terms of capital diversification it’s very important to have a balanced portfolio both geographically and in lines of business,” he said.
“Having said that, we are seeing more growth in some areas linked to protection of properties against natural perils because there is a growing demand. The world is changing and no-one knows exactly why, blame it on climate change or whatever you want, but it’s a fact that we see an increased frequency, and also severity, of the well-known catastrophes such as wind storms and earthquakes.
“We also see new perils that would not have inflicted large claims on the industry years ago. For instance wildfires and floods are now becoming kind of the norm.”
This fuels a growing demand from clients for protection in various forms, Gavazzi said, highlighting the difference between traditional cat excessive losses and more aggregate kinds of structure to protect earnings rather than capital.
“This is definitely an area where we grow because the market grows, and where probably the pricing dynamic is a little stronger than for other lines of business because there is a high need for strong balance sheets to support these kinds of products.
“This means remuneration can be more interesting,” he concluded.
