AUSTRALIA CLAIMS SPOT AT REINSURANCE TABLEPosted On: Apr. 6, 1997 12:00 AM CST
GOLD COAST, Australia-Australia's answer to Monte Carlo's annual reinsurance Rendez-Vous, which debuted last month on Queensland's Gold Coast, reinforces Australia's position as a major player in the international reinsurance market, organizers say.
Australia, where reinsurers now underwrite annual gross reinsurance premiums of about $2 billion Australian ($1.57 billion), is rapidly developing as a major reinsurance center, said Roger Burn, deputy chairman of Sydney, Australia-based Reinsurance Australia Corp. Ltd. (BI, Sept. 2) and head of the Reinsurance Forum organizing committee.
The Reinsurance Forum should help "put Australia on the map," he added.
Mr. Burn predicts the Australian reinsurance market's gross premium volume could "easily double in five years"
The conference drew 212 delegates, including 115 from overseas, according to Mr. Burn. Nineteen delegates came from North America and 71 from the United Kingdom.
Some participants noted that more Asian delegates might have come if the conference had not coincided with the peak renewal season of March 31 in Japan, Korea and India. In Australia, 60% of business renews June 30.
Organizers hope the forum will become a complement to Monte Carlo's Rendez-Vous de Septembre.
Like Monte Carlo, the Reinsurance Forum had few formal presentations, with delegates arranging their own meetings and discussion groups. "It's a relaxed atmosphere, so you can achieve a lot more in a short period of time," Mr. Burn said.
Andrew Chua, reinsurance underwriter for Sydney-based insurer MMI Ltd., said the forum provides an opportunity to "cement relationships."
Paul Allison, executive director-international with the Sydney office of reinsurance broker Minet Burn & Roche Pty. Ltd. and a member of the forum's organizing committee, said that although not a lot of cedents attended, the forum holds promise of providing cedents with greater access to the Australian market.
"People have been trying to get into this market by facsimile, without success," Mr. Allison said.
Mr. Allison said the forum was an opportunity to "post-mortem the last renewals with underwriters," and that many preferred to do that "face to face."
"We're trying to optimize business coming into this market. People may not realize, for example, that GIO has 15 (reinsurance) underwriters. This market's not being used to the extent it should yet," said Mr. Allison.
GIO Reinsurance, a unit of Sydney-based GIO Holdings Ltd., has been the dominant Australian reinsurer for more than a decade.
Mr. Allison predicts exponential growth for Australia's reinsurance market, noting that Reinsurance Australia Corp., launched in 1993, has enjoyed strong growth.
"Timing's everything," he said. "ReAC's market entry was terrific timing. GIO came into the market at a very hard period, they were paying a lot of money for their own reinsurance and thought, 'Why don't we start writing reinsurance?' It was a clear management strategy, and it grew rapidly."
The latest company to enter the Australian market, New Cap Reinsurance Corp. Ltd. in Sydney, briefed the industry on its plans.
New Cap Re started writing business in November 1996, and Paul L. Williams, deputy managing director, said the company plans to write $225 million Australian ($176.9 million) in gross premiums in its first year.
Udayan D. Ghose, New Cap Re chairman, said Australia is the only market where new capacity is required to meet the demands of insurers, and that capacity has developed independent of the U.S. capital markets. Creative underwriting and "a willingness to do more unusual things" are the keys to success for Australia, New York-based Mr. Ghose said.
Mr. Williams said the company's experienced underwriters already have strong market relationships, which allowed it to write $113.6 million since November 1996.
Eighteen months ago North American insurers did not consider Australia a place to buy reinsurance, even though there were "expense efficiencies," he said. However, once those insurers realized the market already was writing $1.2 billion Australian ($943.7 million) of business, they had a different attitude.
"That figure surprises the heck out of them," Mr. Williams said.
New Cap Re cedes 65% of its business to its Bermuda sister company, New Cap Reinsurance Corp (Bermuda) Ltd. New Cap Reinsurance Corp. Holdings Ltd. in Bermuda owns both.
Mr. Williams agrees the forum will serve to increase the worldwide awareness of Australia as a reinsurance center.
An attraction for cedents is Australian underwriters' "creativity." "A lot of what we write is non-standard, not what you would loosely call commodity business," he noted.
Mr. Williams said New Cap Re would focus on "structured deals much more than commodity business, particularly as the market stays soft."
He does not view GIO Re as a competitor, saying 95% of the business New Cap Re had written so far is new. "There's a demonstrable need for new capacity; it's new transactions, we're not eating out of the same pie," he said, noting GIO is a shareholder in New Cap Re.
There were other similarities between the Rendez-Vous and the Australian Reinsurance Forum. During last year's Rendez-Vous, delegates kept watchful eyes on hurricanes Fran and Hortense (BI, Sept. 23, 1996). During the forum, Cyclone Justin, which was later downgraded to a rain depression, hovered off the north Queensland coast as delegates pondered the soft reinsurance rates that epitomized the most recent renewal season.
Growth in the Australian market and the soft rates were primary conversation topics poolside at the forum. Few were prepared to predict when the market might turn, despite occasional rain squalls due to Cyclone Justin, about 1,240 miles to the north.
MBR's Mr. Allison said it would take far more than a single cyclone to increase reinsurance rates.
"One $20 billion catastrophe's not going to make the market go hard; it might need to be a $100 billion catastrophe or a series of $20 billion catastrophes. It could be a big Japanese quake followed by another California quake and a bad hurricane, or just one major hurricane hitting West Palm Beach and going up into the Florida panhandle," he noted.
Adam Hedley, a director of Sydney-based reinsurance broker Australian Independent Reinsurance Services Pty. Ltd., which entered the market 18 months ago, said that in a soft market, reinsurance underwriters must be innovative to get business, and Australia "has always sold itself on that."
Australian underwriters are prepared to be flexible, he noted.
While Lloyd's broker Harman, Wicks, Swayn owns AIRS, Mr. Hedley said it is independent. "We do business with 15 to 20 Lloyd's brokers; this is purely an investment" for the owners, he noted.
Next year's forum will be held March 6-10, again at the Gold Coast's Sheraton Mirage Hotel. For more information, contact Paul Allison at Minet, Burn, Roche Pty. Ltd. at 61-2-9251-2200.