Tiering will continue to shrink P/C landscape: SCOR
SCOR’s leadership again emphasised the importance of size in the reinsurance market and the increasingly tiered nature of the landscape in its annual press conference in Monte Carlo this week.
Denis Kessler, chief executive of SCOR, said that he had foreseen the way the market would change several years ago and predicted that size would be increasingly important in the future.
This prompted SCOR to embark on a strategy to ensure it would be in this top tier, something Kessler said he is proud to have achieved. He said the recent upgrade of the company by Standard & Poor’s to AA-, matching Fitch’s upgrade to the same level in July, represented an important achievement for the group and reaffirms its strong financial position and dominant market presence. AM Best has also changed its rating of SCOR to positive outlook.
“That upgrade was a target for us and we were delighted,” Kessler said. “We are very satisfied with our ratings, which we feel prove we are a tier 1 reinsurer. We said tiering would occur in the market several years ago at a time when the thinking was that the market would instead becoming increasingly commoditised.
“That set us upon a strategy towards ensuring we were in that elite tier 1 bracket. We were right about how the market would change and the actions we took have worked for the company.”
He said that SCOR predicted the current wave of consolidation between what he dubs second and third tier players. He said it was becoming increasingly hard for smaller players to compete—and that once they had lost their place on an insurer’s panel, it was very difficult to regain it. “Once you are off a panel, it is very difficult to get back on,” he said.
He also stressed the increased importance of diversification under Solvency II, something it has also achieved, both through its geographical reach and growth on the life side of the business. He added that SCOR had turned Solvency II into an opportunity by helping its clients deal with its implications in terms of capital management and relief.
Victor Peignet, the chief executive of SCOR Global P&C, said that he sees the company’s future success as being based on its ability to adapt to the specific challenges of different markets. He gave specifics in terms of markets in which the company sees the greatest growth potential.
China and India topped this list, with Peignet noting the potential of these markets as insurance penetration grows and they open up. They were followed by the US, which for largely historic reasons SCOR is underweight in. Peignet described SCOR’s very deliberate approach to growing its market share in the US, in which it has moved from targeting specialist players to more national and global players.
He also stressed that in many markets where it is already strong, the company leads a very high proportion of the business.
Going back to the importance of being a tier 1 player, Kessler added that the gap between this top segment of players and the rest was growing. “The gap is widening; it is becoming more difficult to achieve,” he said.
“The market could continue to evolve to a similar structure as we see in the life reinsurance space, where there are only half a dozen serious players worldwide.”
