UnipolSai shuns offers of private deal on placement
Italian insurer UnipolSai Assicurazioni has been approached by a number of reinsurers looking to complete a private placement for the additional €200 million of coverage it is seeking this year—but it will remain loyal to its existing panel of 17 reinsurers, its buyer told Baden-Baden Today.
Marco Sordoni, head of reinsurance buying for the Italian insurer, said the company plans to increase the €1.5 billion of property-catastrophe reinsurance coverage it bought last year to some €1.7 to €1.8 billion.
The increase is due to organic growth within the insurer’s underlying book of business; its overall mix remains roughly the same as in previous years.
The insurer plans to leverage capacity within its existing panel of reinsurers, as long as the rate remains comparable with the rest of the placement, Sordoni said. He added that using the existing panel is also more compatible with the internal solvency model it uses.
“We are increasing the size of the placement but the composition of the business remains stable and, in my view, that means the price should also remain stable,” he said. “If it is, I would prefer to deal with our existing panel of 17 reinsurers.
“We have had a number of offers to do a private deal at very favourable terms. The appetite of the market is very healthy at that level. But we also have to take into account the impact that would have on the internal model we use.
“The supervisory authority would need to take a view on whether that represents a stable, long-term solution that will be renewed at similar terms. By the very nature of a private deal, that may not be the case.”
Sordoni is also working with the same panel to create a ‘bridge’ cover to fill the €200 million of capacity it will lose when its cat bond Azzurro Re I expires on December 31, 2018. He is delaying issuing a replacement bond until the end of the first quarter of 2019 because he believes it makes no sense to try and complete a large traditional placement and a cat bond at the same time.
“It was just too much to try and do the whole thing together,” he said. “We could be looking to increase its size to €300 million or even €350 million; we spoke to investors and the feedback was that they would prefer to plan it through the first quarter when they have a full understanding of what funds they have available.
“It is a different market and it is worth taking those differences into account. It is relatively easier to establish bridging coverage until then, so that is what we have done.”
Sordoni has restructured the company’s reinsurance programme in recent years, cutting its partners to 17 compared with more than 40 previously. The process was accelerated when, in collaboration with Willis Re, the insurer launched Multipol, a multiline aggregate excess-of-loss programme.
He added that, while he expects a relatively smooth renewals, he remains mindful of the continued consolidation in the market and the effect this can have on counterparty risk.
