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Resourceful reinsurers can thrive in changing market: IIS speakers


LONDON — With reinsurance market conditions changing, reinsurers need to adapt to succeed, a group of industry executives said Tuesday.

Falling premium rates and an influx of new capital present challenges to traditional reinsurers, they said. However, by using their capital to support profitable lines of business and taking advantage of the new capital to better meet their own needs, resourceful reinsurers can still thrive, they said during a panel session at the International Insurance Society's 50th Annual Seminar, which is being held in London this week.

“We are in a cyclical industry, and every good company has a set of strategies and a plan for a soft market and a different set of strategies and plans for a hard market,” said Albert Benchimol, president and CEO of Axis Capital Holdings Ltd. in Bermuda. “It's about risk selection. Prices may be down, but not every building is going to catch on fire, not every company is going to get sued, so risk selection and analysis is very important.”

Successful companies can find areas of profitable business, agreed Denis Kessler, chairman and CEO of Scor S.E. in Paris.

“The environment is challenging, and there are headwinds that we all face, but I remain optimistic,” he said.

While generally the market for reinsurance may be soft, individual markets differ, and reinsurers can redeploy their capital in profitable markets and profitable lines of business, Mr. Kessler said.

Reinsurers that mainly offer commoditized coverage, such as some natural catastrophe coverage, may suffer in the current market, but diversified companies can look to other areas, he said.

The natural catastrophe reinsurance market is attracting increased capital, said Urs Ramseier, chairman of Twelve Capital A.G., a Zurich-based investment manager specializing in the insurance industry.

While natural catastrophe reinsurance historically has been the most profitable area of the reinsurance industry, the business “is breaking away to financial markets, and that's challenging for the traditional market,” he said.

Other reinsurance risks, such as liability risks, theoretically could also be transferred to capital markets, but it is difficult to structure capital market products with an appropriate trigger to address those risks, Mr. Ramseier said.

But as nontraditional capital providers expand in the reinsurance market, traditional reinsurers can benefit from the trend through purchasing retrocessional coverage from the new markets, investing in insurance-linked securities and by offering catastrophe bonds, Mr. Kessler said.