The Reinsurance Directive has already stirred up some interesting structural changes in European reinsurers
The Reinsurance Directive (RID) has received its fair share of both positive and negative press since its adoption in late 2005. For an industry used to regulation, though, the general consensus appears to be one of careful optimism. Certainly the lure of simple, European-wide regulation for reinsurers has proved irresistible to some.
The RID is already making its presence felt, despite its final implementation being 4 months away. Newswires have been buzzing with the news that PartnerRe is to consolidate its operations in Dublin on 1 January 2008 under the Partner Reinsurance Europe banner.
This follows a similar decision taken by XL last year and adds to the growing list of reinsurers lured to Ireland by low taxes and attractive regulation, including AIG, Axa, Ace and Max Re.
However the biggest ripple so far in the European reinsurance pool has been the reaction from Swiss Re, the world’s largest reinsurer.
“The new legal entity structure will result in a more efficient capital management, administration and reporting process for Swiss Re
Swiss Re spokesperson Tim Dickenson
The Swiss company startled the reinsurance community earlier this year by announcing plans to effectively redomicile to Luxembourg.
The establishment of three new carriers is “designed to optimise our legal entity structure in Europe in light of the upcoming implementation of the EU Reinsurance Directive,” according to Swiss Re spokesperson Tim Dickenson.
“The new legal entity structure will result in a more efficient capital management, administration and reporting process for Swiss Re,” he continued.
During a phased rollout – beginning this year and continuing into 2009, depending on the jurisdiction concerned – Swiss Re will begin writing new business out of two carriers: Swiss Re Europe for reinsurance business and Swiss Re International for non-life insurance business, both of which will be domiciled in Luxembourg.
“It seems the passporting chances offered by the Reinsurance Directive are set to shake up the worldwide reinsurance industry
The existing subsidiaries or legal entities will, in the majority of cases, become branches. Dickenson confirmed that Swiss Re expected these branches will be expected to benefit from the group rating.
In the UK, the company will transfer the business currently written by Swiss Re UK and Swiss Re Life & Health to the new Luxumbourg-based operation through a Part VII transfer.
Meanwhile media speculation has centred on the “liquidisation of Swiss Re Ireland”. However as Dickenson points out, this is merely part of wider, RID-influenced plan.
“By the end of 2007, Swiss Re plans for the business of Swiss Reinsurance Ireland Limited - this is mainly non-life business - to be transferred to an Irish branch of Swiss Re Europe (ie a branch of the Luxembourg reinsurance carrier),” he confirms.
With Munich Re apparently considering a similar restructure, it seems the passporting chances offered by the Reinsurance Directive are set to shake up the worldwide reinsurance industry.