Re/insurers facing a ‘new reality’ of no or low growth: PartnerRe

Re/insurers in North America and Europe are facing the “new reality” of a low or no-growth environment, according to Patrick Thiele, CEO of PartnerRe Ltd.
“This new economic reality in the U.S. and Europe has important implications for the re/insurance industry,” Thiele writes in his contribution to the October 2010 edition of PartnerReviews. “With fewer factories producing cars and other goods, and fewer workers to buy them, there will be little or no growth in exposures.
“With excess capacity and high unemployment, it is probable that we will be in a low or no inflation environment for the next few years. That will likely have two consequences – very low short-term interest rates and a continuation of the benign insured loss trends that we’ve seen over the last six years.”
The non-life market has been shrinking for the past three years, Thiele further observes. This shift requires re/insurers to take a new underwriting approach that involves more than simply “riding out the cycle.”
“In the new environment in which we find ourselves, traditional cycle management and waiting for the next upswing may not be enough,” he writes. “Reinsurers need to be prepared to manage the current reality which may continue to be the only reality for some time yet.”
The way to do this, Thiele writes, is through good management. That means “watching overheads and managing expense ratios and…taking a technical approach to pricing and terms and conditions.”