Talk of innovation distracts from real issues: Junke

The soft market in Europe will continue for the foreseeable future but there will be some positive news for reinsurers as they benefit from the introduction of Solvency II, Arno Junke, chief executive of German reinsurer Deutsche Rück, told Baden-Baden Today.

The executive said that there is “really no sign” of strengthening in the market, partly because the low interest environment makes the sector attractive to many types of investors. This has a knock-on effect on rates.

“There’s a lot of capital out there seeking churn and that translates into over-capacity in the reinsurance sector and the reinsurance market. That’s here to stay because there’s no sign on the horizon that this low interest environment will change,” said Junke.

He claimed that the soft market is prompting some reinsurers to focus on innovation as they attempt to take the focus away from the tough market conditions. But he also believes that in many cases there is more talk than real action.

“There has been a lot of talk about innovation, but people aren’t being specific. Innovation is a different kind of animal whatever industry you’re in. People aren’t being clear enough about that and what it really means,” Junke said.

“It’s a sign of a soft market, because people have a hard time getting down to the real issues, such as terms and conditions and rates.”

He said that the imminent introduction of Solvency II will create demand, however, as some insurers will find it difficult to adjust to the new regime in the first few years.

“Reinsurance may act as a good support to insurers during this transitional period.The value of risk transfer will be made much more transparent by Solvency II,” he added.

Talking about the big upcoming topics in Europe, Junke said that cyber risk was definitely a concern, as there is no quick fix. Firms need to analyse how it affects their company and keep up with the needs and demands of their customers.