Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Reinsurers have to find new ways to create value, Swiss Re acknowledges


The reinsurance industry faces an ongoing evolutionary change of its business model and a continued abundance of capital, which is driving home the need for new revenue streams to be found, as value creation for clients remains key.

swiss-re-building-logo-newToday in Monte Carlo the reinsurance giant acknowledged this, saying that the way the market is moving requires reinsurers to find new ways to generate value for their clients.

Change in reinsurance is accelerating, Swiss Re said today, which is now impacting the entire insurance and reinsurance market chain.

While it’s commonly known as the market value chain, the question of how much value is actually being added by some actors and touchpoints remains, while the future of some market participant’s can only be bolstered if they can demonstrate the value they bring to the chain linking risk and capital.

“Fast-paced change creates challenges and opportunities for the industry,” Swiss Re explained this morning.

The industry faces ever more complex risks, exploding levels of data and continued high levels of competition.

To adapt to the changing environment, Swiss Re said that it will work to support clients with its risk knowledge, build on already strong partnerships and leverage technological innovation to meet a growing need for insurance coverage.

Swiss Re’s CEO Reinsurance Moses Ojeisekhoba explained, “The industry is changing for a variety of reasons. We are confident that, with our continued focus on the needs of our clients, the scale and diversification of our business, and our risk knowledge and R&D capabilities, we are in the right strategic position to address change proactively.”

As ever, the reinsurer mentions abundant capital as a challenge the industry faces, explaining that this has “impacted the entire reinsurance value chain,” while also increasing “cost sensitivity.”

As a result, Swiss Re highlights the need for, “reinsurers to find new ways of creating value for primary insurers.”

Swiss Re believes that the reinsurance industry has a vital role in supporting clients across the market chain, from “innovation design to claims optimisation.”

“Swiss Re is doing so by fostering partnerships with clients and companies from outside the insurance industry to develop innovative, technology-based solutions which help close protection gaps, tap into new sources of growth, and deliver better products and services to the end-consumer,” the company explained.

Ojeisekhoba added, “As a risk knowledge company that leverages technology and embraces innovation, Swiss Re will fully leverage its capabilities to support its clients in this rapidly changing environment. We see good opportunities as we partner with our clients to meet the growing need for insurance protection. These partnerships are key, as in the end, we’re only as successful as the partnerships we have built.”

In acknowledging the need to offer a broader and enhanced service offering to clients, Swiss Re confirms one of our theses, that increasing competition is going to be seen in the emerging “service layer” of the re/insurance industry, which could put the large reinsurers and large broking houses into direct competition for adding this client value.

As broker margins come under pressure and the reinsurance placement and transaction become increasingly tech-driven and automated, there will be a growing need to demonstrate the value provided through the broad services the largest brokers can offer to their clients.

At the same time, as reinsurance capital becomes increasingly commoditised and competition from the ILS market and capital efficient business models continues to grow, the biggest reinsurance firms will have to demonstrate the value they provide through added-value service provision as well.

The goal is to make client relationships as sticky as possible, owning them and ensuring that they remain with you over-time.

In time, this will result in reinsurers becoming much more than just providers of risk capital, while brokers become a full-service offering that can also connect capital and risk through their own technology (see Aon’s move today for a glimpse of what may be happening here).

This will mean all-sides of the traditional market competing for ownership of the client relationship, but could also result in further redundancy and duplication of effort across re/insurer and broker client service provision.

Of course it also means the broker and re/insurer distinction may become increasingly blurred, which should make for interesting competitive traits coming to the fore.

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