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
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
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