13 September 2015 Insurance

Zurich will refine spend; eliminate more reinsurers

Zurich Insurance will continue to ‘refine’ its reinsurance programme in 2016, reducing or eliminating reinsurers that are not part of the company’s global core relationships. This strategy could be further extended if the company’s acquisition of RSA goes ahead.

Speaking to Monte Carlo Today, Markus Meier, the company’s head of reinsurance management, said that Zurich’s reinsurance strategy dovetails with its group risk appetite. This has led to a smaller panel of reinsurers being used over time.

“Reinsurance is used strategically—not opportunistically—at Zurich and it is not a crutch for poor underwriting. We continuously reshape and enhance our reinsurance treaty protections,” he said.

“Over the past few years this led to a significant reduction in reinsurance premium spend with a corresponding smaller panel of reinsurers.

“In 2016 we will continue to expand our business relationship with those strategic reinsurance partners who are committed to invest in a long-term strategic relationship and where we are very familiar with the financials, the management and the strategy.”

Meier said that while the percentage of reinsurance purchased in relation to gross written premium will be fairly stable year on year, it will make further refinements to a number of reinsurance programmes, in particular natural catastrophe protection.

“This will mean reinsurers not belonging to our global core relationships end up with a reduced signing or even a complete elimination from programmes altogether,” he said. He added that the influx of capital markets money has combined with strong reinsurance results and the fact that many cedants including Zurich are buying less treaty and facultative reinsurance compared with a few years ago, to make the market extremely competitive.

“Coming through the July renewals prices continued to go down albeit at a reduced pace compared to previous years,” he said. “While we have seen mergers in the reinsurance arena and a continued share buy-back from a number of players, there is still an abundance of reinsurance capital to be deployed. This will invariably result in a prolongation of the current ‘buyer’s market’.”

He refused to be drawn on the potential implications of the RSA deal on reinsurance spend but did reiterate that Zurich believes the deal could “bring significant benefits to us and to our investors in terms of the complementary fit of RSA’s business with our own operations and in financial terms”. The worry for reinsurers will be that further rationalisation of reinsurance spend would follow.

Meier also highlighted the need to advance the understanding on natural catastrophe perils.

“There are still many exposed cities or industrial areas where reliable modelling is either limited or simply unavailable,” he said.

“I look at these challenges as opportunities— companies which embrace these challenges and strive for the survival of the fittest will be the winners of the future.”

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