Interesting manoeuvres expected at reinsurance renewal, buyers investigating additional limits: Guy Carpenter

Some interesting manoeuvers can be expected as reinsurers seek to hold or grow their share of signings in the forthcoming renewals, Nick Frankland, CEO of Europe, Middle East and Africa (EMEA) operations for Guy Carpenter & Company, LLC, suggested Sunday during the Reinsurance Symposium in Baden-Baden.

Hosted by global risk and reinsurance specialist Guy Carpenter, a wholly owned subsidiary of Marsh & McLennan Companies, Frankland said in assessing the implications of market consolidation that bountiful capacity and wide buyer choice “will weigh on the discussions that take place during the coming week and we expect some interesting manoeuvers as reinsurers seek to hold or grow their share of signings.”

In fact, he said, early signs are there may be even greater savings available to buyers than anticipated “and the trend towards combining coverages and multi-year placements will undoubtedly continue.”

Reinsurers do not expect an early end to the current pricing environment or the latest wave of mergers and acquisitions activity in both insurance and reinsurance, Frankland told attendees.

That said, “there are also encouraging signs that buyers are recognizing the capital benefits achievable in such a responsive market and are beginning to investigate alternative structures and additional limits,” he added.

Exploring some of the drivers for M&A activity, Stephen Catlin, executive deputy chairman of XL Catlin, explained there were many different criteria influencing the recent market consolidation. “If you believe consolidation is going to happen,” Catlin told attendees, “why wouldn’t you get on the front foot, be proactive and choose your partner?” 

M&A is not a “panacea,” but rather “one strategic mechanism for evolving in the new market reality,” cautioned John Doucette, chief underwriting officer of Everest Re. “Global reinsurers are well-positioned to build off their internal strengths with scale, diversification, and expense and capital efficiencies. Supplemented with innovative products and capital structures, relevance to clients and brokers can be maintained and enhanced for the winners in the new world order,” Doucette noted.

Chris Klein, head of EMEA Strategy Management at Guy Carpenter, said the success of consolidation activity would depend on the quality of the execution. “We have heard that growth is not simply about swallowing up each other,” Klein told attendees. “The proof is in the execution and success ultimately depends on continuing to provide customers what they need and want at a value-for-money price within a stable relationship,” he added.

“The winners will be those reinsurers that provide client-oriented, sustainable, consistent and professional services and capacities, combined with well-designed business models,” suggested Eduardo Pérez de Lema, managing  director of Mapfre Re. “Often they will be companies that have already built a strong franchise, skills, platforms and client relationships who will benefit from this trend, without having to enter into challenging and costly M&A processes.”