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Interview of the week

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Emmanuel CLARKE, Head of Property & Casualty Department, PartnerRe


It is no secret that reinsurance prices follow cycles created mainly by supply and demand forces. While demand for reinsurance remains strong at present, reinsurance capacity continues to grow, shifting further towards stronger supply. That being said, the reinsurance cycle depends heavily on what happens with the primary insurance cycle.

XPRIMM: Do you think the reinsurance market is going to turn soft as estimations for 2008 indicate a drop in reinsurance rates?
Emmanuel CLARKE:
It is no secret that reinsurance prices follow cycles created mainly by supply and demand forces. While demand for reinsurance remains strong at present, reinsurance capacity continues to grow, shifting further towards stronger supply. That being said, the reinsurance cycle depends heavily on what happens with the primary insurance cycle. On the direct side, and especially in the commercial and industrial lines, we currently see a further reduction in original rates (while policy forms and deductibles are still holding at reasonable levels). This means margins are getting slimmer for both insurers and reinsurers. Every market and every line of business is at a different point in time in the cycle curve. Every professional player - insurer and reinsurer alike - must assess whether risk appetite is commensurate with return. At PartnerRe, we analyze every case on its own, looking at exposure growth, loss trends and primary rates movements in order to assess a fair return for each reinsurance solution.

XPRIMM: How was the renewal season for PartnerRe in this region? How do you see the major development of the re/-insurance markets in CEE and CIS region?
E. C.:
The insurance markets in Central European and CIS regions are extremely dynamic. In terms of our January 2008 renewals, we were pleased to be able to expand our footprint in these regions which are very important for us. Looking forward, we see the compounding effect of economic growth and increasing insurance penetration. Risk awareness is developing, values keep growing and concentrating and people and organizations are keener to protect themselves against natural and man-made perils. One concern is that this is a market with very significant peak risks, from industrial and energy sectors, that trigger high volatility for insurers and reinsurers. Yet, the premium base from the market at large is not yet sufficient to bring the right balance to these peaks; this makes it challenging to develop non-proportional reinsurance solutions with a mutual interest to both reinsurance buyers and sellers. Lastly, this is a market which will probably undergo significant concentration in order to bring scale, balance and diversification to the key players.

XPRIMM: Taking into consideration the opportunities, what plans has PartnerRe made for this region in 2008?
E. C.:
PartnerRe is already very active in this region. We have dedicated regional teams that know the markets and players very well. Our approach to the market is to develop solid and partnering relationships with selected companies that are willing to work with us to share data and information in order to form a mutually transparent and beneficial relationship. PartnerRe can then offer substantial capacity at excellent security as well as expertise in all lines of business.

XPRIMM: What are the major opportunities and threats of the Romanian insurance market one year after joining EU?
E. C.:
The opportunities are plenty: penetration growth compounded with economic dynamism, product development and sophistication, EU accession and its related implications. In this period of dynamic development, one of the key challenges for market participants is to stay on the right track with respect to risk management and return expectations. Risk management policies and approaches will have to be developed to accompany and support this dynamic growth.

XPRIMM: What is the PartnerRe strategy in Romania in 2008?
E. C.:
Our strategy in Romania is consistent with our approach to all markets: provide adequate risk solutions to our clients through solid relationships based on mutual transparency and interest. We have high quality relationships in Romania and want to foster them to further enhance our partnerships through close cooperation on technical issues.

XPRIMM: What are your expectations regarding the reinsurance demand in Romania for this year and for which lines of business do you think this demand would increase?
E. C.:
Romania is a Cat-prone market. With the expected growth in insurance penetration and values, we can expect further concentration of Cat exposures in certain peak zones. This will of course continue to stimulate demand for reinsurance. Additionally, the development of motor insurance, for instance, makes many companies think twice about how much exposure to potential variations in loss frequency they wish to retain. This is a sound risk management question to address and an area where we see further demand.
| Published on 19.06.2008






















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