The head of outwards reinsurance at Brit Insurance enjoys diversity in his work, but also admires those who maintain stability and old-fashioned values amid a rapidly changing industry
Reinhard Seitz has an axe to grind. Brit Insurance’s head of outwards reinsurance - a strapping German who loves tree-felling in his spare time - loathes reinsurers who rescind on contracts when the going gets tough.
Formerly of Swiss Re, Seitz began his career with an apprenticeship at a health insurer in Munich. After completing his degree in economics, banking and finance, Seitz returned to the reinsurance industry and has never looked back.
A 28-year insurance veteran, Seitz says it is challenging to keep up with the rapid changes in the industry, but this is also his main motivation for remaining on the outwards buying side.
“The beauty of the reinsurance buying position in a firm is that you deal with all lines of business,” he says.
Q: How would you describe the current pricing situation in the reinsurance market?
A: Following the 11 March Japan earthquake, the market is hardening in almost all lines of business. Mainly in property, but also in other lines. Overall, I see this as a good sign.
Q: How do you decide what to buy and how to structure your reinsurance programmes?
A: We have an overall strategy to use outwards reinsurance to manage risk, reduce volatility, control aggregates and create capital efficiency. Outwards reinsurance is a tool Brit Insurance uses to optimise its risk profile.
Q: What, in particular, is important to your company as part of this process?
A: I would say the most important part is to manage the portfolio to comply with our set risk appetite and within our tolerance. The risk appetite matrix is the most important tool that we use. It forms part of our internal model and is what we use to manage the realistic disaster scenarios to keep within our stated tolerances.
Q: How has current pricing affected your buying strategy?
A: We didn’t buy more when the market was softening in the past two years. Our buying is not that reliant on pricing. Obviously it must make economic sense, but in principle we have to manage the volatility and get close to the decided risk appetite of the group.
In a harder market, we get more premiums on the inwards side that allow us to spend more on the outwards side than in a softer market. The exposure could be the same in both soft and hard markets and that’s what I have to manage.
Q: How has your buying strategy changed post-financial crisis?
A: It didn’t change. The strategy and philosophy has been more or less unchanged. Obviously we have looked more closely at our counter-party risk exposure and monitored the overall capital situation. But in our case it has been more or less stable over the post-financial crisis period.
Q: What impact will Solvency II have on the purchase of reinsurance?
A: Solvency II will lead to a further centralisation of buying decisions. Brit Insurance did that two years ago by introducing a central buying position. That is my job, in fact. It is easier to manage your risk appetite matrix if you have central buying, rather than divisional or fragmented buying. Also, I think the buying strategy will revolve around the internal model. For us, that will not mean a dramatic change. We could see changes to how credit risk exposure is treated. It might get slightly more weight.
Q: How much premium do you cede to reinsurers?
A: Over the years it has been about 15% of our premium income.
Q: To what extent do you make use of alternative reinsurance structures such as catastrophe bonds?
A: We constantly monitor the market. When our Fremantle bond expired in 2010, we did an in-depth analysis of the market and compared the traditional versus the non-traditional products.
In the end, it is a management decision if the risk that you take on with the non-traditional cover is worth the difference in price. It always depends on where you plan to use your non-traditional cover - in earnings protection or balance sheet protection. That is what drives the decision.
Q: What do you most look for in reinsurers?
A: Stability, continuity - just old-fashioned values, basically. The ability and willingness to pay. They really should be there when you need them.
A example is that we had a programme in the market with two layers and we had quotes that expired on 11 March (the day of the Japan earthquake). One reinsurer decided to withdraw the quote, while the other stood by his quote and accepted that in a long-term, professional relationship that is how you deal with your partners.
Q: How is the success of your reinsurance purchasing measured?
A: Among other factors, it is usually measured by how close we come to our plans. But it is also important to have the best-rated companies on the panel. It is not just quantitative, it is also qualitative.
Q: How did you become involved in buying reinsurance?
A: I came into reinsurance buying due to my position in underwriting. I was always involved in buying. Then, over time, I specialised. As a result of continuing specialisation, your box gets smaller and smaller in terms of lines of business. But the outwards reinsurance job offers so much variety.
Q: Describe your average day.
A: I might have a meeting on motor reinsurance in the morning. Then I may go and see marine brokers or reinsurers for lunch. I may spend time analysing speciality line exposures and deal with property reinsurances in the afternoon. It’s very diverse and that is what makes it so interesting.
Q: Who do you most admire in the insurance industry and why?
A: I admire the pioneers of the insurance-linked securities market - the people who introduced that to the reinsurance world. I think they brought a lot of additional capital to the market and also a different way of thinking about risk management.
Q: What do you do in your spare time?
A: Going into spring and summer, it is golf and gardening. In the winter, it is skiing and tree-felling in Bavaria.