Traditional reinsurers must remain relevant to survive challenging market dynamics: Willis Re

Traditional reinsurers must remain relevant and be mindful of areas into which they are looking to diversify in the face of increased competition from the influx of capital markets capacity, Willis Re president Paddy Jago cautions in a video blog on WillisWire.

Those traditional property catastrophe reinsurers that are responding to increased competition from the influx of capital markets capacity by diversifying into other lines of business should proceed with caution, Jago recommends.

“What concerns me is that you’ll have markets going into areas where they have no idea what they’re doing. For me, the broker, maybe that will be a pot of gold, because I’ll have a market that is unable to rate the risk commensurate with the exposure,” he says.

“But if they don’t understand what they’re doing they could end up exacerbating their problems, and instead of growing their top line – which is the reason they’re entering new markets in the first place – they could end up exploding their bottom line.”

Jago suggests the reinsurance market is in the greatest state of flux that he has seen over his 35-year career in reinsurance. Remaining relevant, he emphasizes, demands three things: having a high degree of expertise; being of a certain size; and having in place relationships in the reinsurance market.

“These three things will dictate whether you remain meaningful in the reinsurance business in the future,” Jago says.