Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

“To stand still is to fall behind” in re/insurance: KBW


“To stand still” in an insurance and reinsurance market that us undergoing fundamental structural change, “is to fall behind”, say analysts at Keefe, Bruyette & Woods, echoing a message Artemis has delivered many times in the last few years.

Given the way the reinsurance market is changing it is seen as increasingly risky to try to carry on regardless, with little or no strategy for responding to the impact of lower rates, abundant capacity and growing competition from new business models, alternative capital and insurance-linked securities (ILS).

Hence we’ve written at length about the need for insurance and reinsurance firms to, rather than  be fearful, embrace change, innovate, leverage new capital sources and new technologies, in order to adapt to changing market conditions and remain relevant.

KBW’s analysts go a step further, saying that standing still and watching the market changing before your eyes can only result in re/insurers being left behind.

KBW writes that most insurers and reinsurers are now seeking to move forwards, despite the challenging market environment that they face. Some form of focus on innovation is evident at the majority of companies, ranging from a focus on efficiency, new product development, customised solution offerings, or a focus on expanding teams.

“Market relevance is clearly a goal,” write the analysts, with the majority of reinsurance firms eager to move beyond being seen as commoditised capacity providers.

These “value-added” approaches represent the traditional reinsurance market’s “basic response to alternative capital,” the analysts explain.

One of the factors noticed by KBW, during a recent trip to meet insurance and reinsurance companies in Bermuda (when it also noted impending 10% price cuts at June renewals), is a growing focus on technology at specialty insurers. These efforts seek to streamline sourcing of wholesale risks, which could enable commissions to be lowered making companies more competitive.

Examples such as Hamilton Re’s focus on technology on both the investment and underwriting side of the business represent an example of “potential insurance industry disruption,” the analysts explained.

Positive steps need to be taken in order to position re/insurance companies to continue to profit, in the new lower rate insurance and reinsurance environment. With no sign of price improvements coming any time soon, except for after a major capital draining event, re/insurers need to keep moving, keep progressing new initiatives and keep innovating if they are to remain relevant.

Also read:

Relevance and scale in re/insurance should not be confused: Lancashire.

Innovation a theme at recent Bermuda ILS & reinsurance events.

Innovate & adapt to navigate a reconfigured reinsurance industry: S&P.

Innovate or perish. A message for insurers and reinsurers from Aon.

Reinsurance capital accelerates. Too early to say what the future holds.

Ability to attract, deploy third-party capital important for reinsurers: Aon Benfield.

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