Industry has the potential to be more innovative
While dwindling insurance demand and falling prices are making organic growth prospects look grim, there is hope on the horizon, according to speakers on a panel session at the fifth annual MultaQa Qatar event.
Salvatore Orlando, head of southern Europe, MENA Africa and Latin America at PartnerRe, said that reinsurers should not expect constant growth. “Everyone wants to do business. We are business people. But in reinsurance it is not necessary each and every year to, say, increase your portfolio by 10%,” he said.
Echoing comments made earlier in the day by Lloyd’s deputy chairman Graham White, Orlando said disciplined underwriting was key. “It is essential to apply cycle management to be a successful company.”
However, while acknowledging growth was stagnant in mature markets, he said emerging markets, in particular Brazil, Russia, India and China, would provide opportunities
Juergen Gerhardt, chief executive officer of ECHO-Re, agreed with Orlando that growth was not always possible or necessary. However, he expected that the industry would see opportunities in the medium-to-long term.
“As exposures are expected to grow more rapidly than the overall GDP because of technical progress, increase in international value, but also because of concentration of values in areas prone to natural catastrophes, this should also help reinsurers to grow faster than GDP,” he said.
Manfred Seitz, managing director of Berkshire Hathaway Reinsurance’s international division, said that the reinsurance industry had been lacking in innovation in recent years. He said that pushing into emerging markets and developing new products for mature markets was being driven by primary firms. “The reinsurance industry can play a supporting role and hope to help promote this.”
He added: “In recent times we haven’t done much, We have looked more at how we can move away from risk.”
However, he added that there was scope for reinsurers to start innovating again, particularly around specific events. He pointed out that the September 11 2001 terrorist attacks spurred the industry into action because of the unexpected accumulation of losses from different business lines in a single event. “It will happen again now in Japan where we have the combination of earthquake and tsunami. That is an area where the reinsurance industry could and should innovate,” he said.
He added that Munich Re’s proposed industry-wide initiative to offer greater liability limits to offshore oil rigs was a recent example of innovation. “There is plenty of potential, which I hope will prompt a return to innovative behaviour,” he said.