The general director and chief underwriting officer of Panama’s largest reinsurer Barents Re gives the lowdown on his strategies and goals
Q: How would you describe Barents Re’s strategy?
A: Barents Re is a specialist niche reinsurer. We aim to grow in niche market areas that are not necessarily the biggest premium generators but give us the best combined ratio.
We are usually described as the most innovative reinsurer in the region because of our direct development approach. In the developed world, reinsurers do not design insurance products. The broker brings you business, and you either accept it or decline it based on your underwriting criteria. In our market, it doesn’t work that way. If we did that, there would be no way for us to compete with the big global reinsurers.
We partner with insurance companies, large clients, municipalities and utilities to design a specific insurance product that provides adequate coverage for clients’ needs. We have, for example, products that cost 50 cents a month, that cover specific benefits for disability and loss of income. These products are typically tied into either banking relationships or utility services. For example, we do unemployment cover for electric companies and cable television companies.
The products developed in Latin America are specifically for countries where incomes are lower but people have need for coverage. The benefit of mass-market products is that the diversification is substantial and therefore the loss aggregate is diminished.
Q: What are your goals?
A: Our aim in the region is never to be the biggest reinsurer by premium volume, but to be the most profitable with the most adequate loss ratio. Our loss ratio at the end of the year was 58%. As we are a privately held reinsurer, most of our profits are reinvested, so we have been able to grow our capital. This year, we plan to have an equity of slightly over $100m.
Our aim is to be the most profitable reinsurer in the region. Our underwriting discipline and reinvestment have allowed us to have the highest rating of any regional reinsurer in Latin America, which is an A- from AM Best. We feel that we are ideally situated and we will continue to focus on innovation.
We also want to march to the beat of our own drum. We are basically a facultative reinsurer, which allows us to have total control of our underwriting process, and that has had an effect on the results we have had year after year.
In 2011, we are planning to reduce our size in terms of premium. We will increase our capital base. We don’t go after premium. We like to have a risk allocation we feel comfortable with.
Q: What is the significance for you of the A- rating you were awarded in September by AM Best?
A: We are the only major regional reinsurer with this level of rating because most of the reinsurers are limited in their rating scale by the sovereign ceiling of the country where they operate. It is very difficult for a reinsurer to obtain an A rating because it is several notches above the sovereign ceiling.
Q: How do you ensure your underwriting is profitable?
A: We have risk matrices and systems in place. We also use analytical products from partners such as Aon Benfield to help us determine the adequate reserve-to-capital ratio, and we have a very strong actuarial team that monitors our risk-to-capital levels.
Q: In which business lines is Barents Re strongest?
A: Barents Re is mainly a reinsurer of affinity business, financial lines, surety, civil responsibility and personal accident.
Q: Where do you see the biggest opportunities to grow?
A: We are involved in a strategic venture to start an operation within Latin America and we are also analysing possible joint ventures with limited risk exposures on our side to develop an operation headed in Zurich and based in the MENA (Middle East and North Africa) region to underwrite specific tailored businesses in that region.
Also, Barents Re has insurance companies in some countries in Latin America and we plan to expand this reach within the next year. We are also thinking of establishing MGAs as underwriting units in London or Zurich. Sometimes there is business from Latin America that goes to London and a broker needs to place it, but Barents Re is considered too far away.
Q: Why is the MENA region particularly attractive?
A: It is the only region we feel has some similarities to Latin America, in terms of culture and level of development. This allows us to use what we have learned to add value and develop new products.
Q: What is your biggest challenge?
A: Obtaining sufficient retro capacity to protect our capital base and sustain our underwriting growth. GR