The recent seminar held in Stockholm by the International Underwriting Association of London reflected change, uncertainty and opportunity, says Marie-Louise Rossi.
Through the Looking Glass, the theme of the 14th international seminar organised by the International Underwriting Association of London (IUA), reflected our desire to encourage as broad and objective a view of reinsurance as possible. The title of the first debate - “As others see us” - set the tone, as did the number of speakers chosen from outside the industry.
The first session could be described as a wake-up call. Michael O'Halleran, president of Aon, was in no doubt that the pace of change within the industry would continue. Indeed, such is the convergence and blurring of boundaries within financial services that he questioned whether the term “reinsurer” should be used at all.
Other speakers had some blunt messages. Alan Fleming, an eminent risk manager who recently joined Railtrack in the UK, said there was some disenchantment with reinsurers, especially when it came to claims handling.
Robert Childs of the Hiscox managing agency at Lloyd's - a buyer of reinsurance - expressed concern at the current low level of rates. Although they were to his short-term benefit, they could undermine the stability of his suppliers.
Dr Arend Vermaat, deputy president of the International Association of Insurance Supervisors, said the convergence of insurance and capital markets could lead logically to a similar convergence of regulation.
Trevor Petch, senior analyst at Robert Fleming, used a blank slide to illustrate the public perception of the reinsurance industry. In the lively discussion from the floor that followed, delegates questioned whether this mattered. No one - and certainly not Mr Petch - seemed to know the answer.
On behalf of the reinsurance industry, Pierre-Denis Champvillard of SCOR spoke of the growing expectations of clients. He warned, however, that there was “no such thing as a free lunch”. Over time, reinsurers required acceptable margins and balanced client relationships.
The debate on information technology considered the relatively slow uptake by the reinsurance industry. Ian Dilks of PricewaterhouseCoopers criticised those within the financial services industries who used electronic commerce simply to replicate their existing activities. Organisations should use IT to re-engineer business processes, he said.
Kevin Ashby of LIMNET, soon to lead the global (re)insurance IT network when it merges with Win and Rinet, made something of a clarion call to the London market. He said the new organisation “offers those involved the opportunity to be at the forefront,” but progress depended on “executive support for action.”The appearance of Lloyd's chairman Max Taylor at the seminar was a break with tradition. He described the growing co-operation between Lloyd's and the company market in London. Referring to IUA chairman Tim Carroll, Mr Taylor said: “There is very little Tim and I do not agree on.” The point was underlined when, in a genuine but timely coincidence, CLM became the first managing agency at Lloyd's to join the IUA as an Associate member.
Patrick Duffy, chief executive at St Paul Re, concentrated on the world's oldest reinsurance market - Europe. He predicted a larger scale industry, crossing national boundaries, with fewer and larger insurers buying from fewer and larger reinsurers.
On day two, the chairmen of the breakout groups reported back to the plenary session as follows:
• Alternative risk transfer: David Anthony of Standard & Poor's said that ART was no longer especially “alternative” - it was rapidly becoming mainstream.
• European monetary union: Lord Hunt of the Wirrall, former UK cabinet minister and an eminent insurance lawyer, said his group had concluded that the single currency would lead to a united European state.
• The global market: Michael Butt of XL Capital reported a consensus that London would remain the main global insurance marketplace.
• Low rates - are they here to stay? Mark Hewlett of Moody's referred to a “fear factor” that appeared to be holding back reinsurance prices.
The concluding debate - on consolidation - found a surprising degree of agreement among a diverse range of chief executives. Consolidation was inevitable, but mergers and acquisitions did not guarantee success.
Göran Thorstensson of Sirius International said the crucial question was, whether becoming bigger created shareholder value. Often it did not. Henry Keeling of XL Mid Ocean Re said consolidation was an option in the “cheating phase” - using consolidation to give the impression of growth. Bill Adamson of CNA Re said the majority of mergers failed to meet their financial objectives. Bernhard Fink, chairman of ERC Frankona, gave an account of his own company's recent prolific merger history, stressing the importance of the integration process - “a management task in itself”.
Our seminar, Through the Looking Glass, captured the mood and thoughts of senior executives at a moment in time - reflecting the change, uncertainty and opportunity that abound in equal measure within our industry. One of the few things which are definite about the coming two years is that the scenario will be very different when we meet again in 2001.
Marie-Louise Rossi is chief executive of the International Underwriting Association.