MONTE CARLO, Monaco — Cedent companies' decision-making about reinsurance buying has become a board-level concern, according to executives gathered at the Rendez-Vous de Septembre reinsurance meeting in Monte Carlo, Monaco, this week.
Reinsurance now is viewed in a more sophisticated way and treated as a form of capital as well as protection, they noted.
“The reinsurance buying decision is actually moving up the chain — often to the C-Suite,” said Victoria Carter, vice chair of Guy Carpenter International in London, a unit of Guy Carpenter & Co. L.L.C.
While reinsurance used to be bought by line underwriters at cedent companies looking to protect their books of business, changes such as the proposed introduction of risk-based capital regulatory regimes such as Solvency II in Europe means that reinsurance is now viewed as an important form of capital relief and the decision about its purchase increasingly is being taken by a CEO, CFO or chief risk officer, she said.
While personal relationships still play an important role in the reinsurance industry, decisions about reinsurance buying now are being taken more objectively, noted John Berger, CEO of Third Point Reinsurance Ltd.
Capital management tool
“The topic of reinsurance has become a C-suite topic,” said Jean-Jacques Henchoz, CEO of reinsurance for the Europe, Middle East and Africa region for Swiss Re Ltd.
Many CFOs and CEOs now understand that reinsurance is not simply a tool for risk transfer but also a capital management tool, he said. “Reinsurance has become a strategic topic,” he said.
Cedent companies need to show stability in their earnings, and this has prompted cedents to become more sophisticated about looking at their capital, noted Victor Peignet, CEO of Scor Global P&C, a unit of Paris-based Scor S.E.
“Reinsurance is now a tool of capital management rather than arbitrage,” he said.
Scrutiny of capital from regulators and rating agencies has been a factor in changing the reinsurance buying decision from one that was made at line-underwriter level to one that is taken by CFOs and CEOs, noted John Cavanagh, CEO of Willis Re, the reinsurance arm of Willis Group Holdings P.L.C.
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