Volatility drives demand for quota shares
In the wake of what may be record levels of catastrophe losses in North America, demand for quota shares is on the rise, Jorg Bruniecki, head of global clients & broker management at PartnerRe, told Baden-Baden Today.
This trend has been developing since it first started to show momentum after the UK changed the Ogden personal injury discount rate, the rated used to calculate personal injury losses, more than expected, causing companies to revise their profit results mid-reporting season.
But this trend is gaining speed after hurricanes Harvey, Irma and Maria (HIM) hit North America, resulting in insured losses that could reach $100 billion, in the third quarter.
“The distaste for volatility increased massively even before HIM,” Bruniecki said.
He explained that if movement of 1 percentage point in a group’s combined ratio causes a 10 percent fall in its market capitalisation it can lead to dismissal of the CEO. That shows how nervous capital markets are around volatility, Bruniecki explained.
“There are more requests for casualty quota shares coming to the market as a result,” he noted.
Quota share is seen as a tool for capital relief as well as to manage volatility. Reinsurance can be used as an alternative to raising funds in the capital markets without having to stream down capital from the holding company to local units, he explained.
Companies must have a dividend distribution model and they have to deliver on that. They therefore depend on having constant streams of revenue coming from affiliated companies to be able to pay dividends and also to be able to look into potential M&A transactions.
“There is a lot reinsurance can do to support that,” Bruniecki said.
PartnerRe is working closely with cedants to develop a three-year target plan for their businesses—even the majority that also work with brokers.
He added that the company is reaping the rewards of a new-found focus: the Bermuda-based reinsurer has recently exited the insurance and primary business.
“Clients find it important that you are a pure-play reinsurer,” Bruniecki concluded.
Get the latest re/insurance news sent to your inbox every day - Sign up to our free email newsletters
Other stories from the Baden-Baden Day Three newsletter
HIM losses will be capital event for some syndicates but Lloyd’s steady on cat
Scale of Q3 cat losses could be the biggest ever insured cat event
Russia’s national reinsurer makes its mark in year one
Cat losses and the role of local knowledge
RPA more disruptive in re/insurance than ‘useless’ blockchain
Global post-loss rate hikes expected
2017 nat cats show value of objective event data
Cat bonds key to closing protection gap
Know your exposures before you talk price
Losses may signal end of soft market
Nat cat losses are an opportunity to prove resilience
Growth of cyber offerings a hot topic
Qatar Re to cash in on US rate recovery
German motor market needs readjusting
Recent cat losses could make ILS collateral more attractive
Soft market still a concern for renewals
Reinsurers must protect their margins
Disposal of legacy business can increase efficiency
Rate hikes unlikely: Caribbean cat facility
P&C execs bullish on pricing following record cat losses
E+S Rück forecasts growth in Germany
London Market launches campaign to tell its story
Cyber risk modelling gets an upgrade
Already registered?
Login to your account
If you don't have a login or your access has expired, you will need to purchase a subscription to gain access to this article, including all our online content.
For more information on individual annual subscriptions for full paid access and corporate subscription options please contact us.
To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.
For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk
Editor's picks
Editor's picks
More articles
Intelligent Insurer
Newton Media Ltd
Kingfisher House
21-23 Elmfield Road
BR1 1LT
United Kingdom