Members of the Liberty Syndicates team bringing you their views on the latest developments and key issues in the insurance market.
By Eric Sugier May 1, 2012
At difficult times in the reinsurance cycle, it is essential for us to maintain the highest level of communication with brokers and clients to ensure that our messages about the value and security of working with a global insurer come through loud and clear.
By following this strategy at a time when reinsurance prices across the world show signs of upward pressure, we have maintained strong relationships with our clients and brokers due to our high level of service. Price negotiations at the beginning of 2012 have been difficult for many cedants due to the level of international losses in the first half of 2011, particularly the earthquake and tsunami in Japan, US tornadoes, earthquakes in New Zealand and weather-related catastrophes in Thailand and Denmark. Added to that are the effects of new catastrophe model versions in the US and Europe.
Despite the high level of international losses, there is not a unique global trend in reinsurance but rather individual drivers specific to each geographic area and business line.
At our Worldwide Reinsurance division, rate monitoring on a rate adjusted basis currently shows a change of +9%.
Rates in property reinsurance are also rising globally.
Trade credit on the other hand has witnessed rate reductions but this was not only expected but also within estimations, due to excellent results over the last three years within the market.
Even within a world of Skype and videoconferencing, and especially during difficult market cycles, face-to-face meetings remain an important part of a successful business relationship. That is why many of our clients and brokers in worldwide reinsurance have taken the trouble to visit our Paris office, or our colleagues in London and Cologne and our team members often reciprocate and travel to see clients. These in-person meetings help to build on the trust that already exists in our business relationships. It is fair to say that working hard to ensure clients have total confidence in us is the biggest part of our job.
This kind of clear, regular and personal communication is particularly important for our clients in China and India. In China’s rapidly developing insurance market, insurers’ portfolios are often growing so quickly that it is difficult for them to maintain reinsurance partnerships that adequately reflect their needs.
It can also be a challenge for these insurers to grow their risk management and data processing capabilities in a way that keeps pace with the level of premium growth.
The clear positive note from China’s growing market, besides the growth itself, is the significant contribution from brokers in the area of data. Brokers have demonstrated to their primary insurer clients that accurate and consistent information can help to gain the best quality support on the international reinsurance markets when they purchase protections. There has to be an explanation when there are big changes in the reinsurance underwriting information provided for renewal decision e.g. in exposures or historical losses year on year.
International reinsurance brokers have also made great strides in data modelling, including research into the loss record which is improving every year.
While there has been a movement in China to secure more favourable policy wordings to cedants, many reinsurers have remained resistant due to the level of international losses in 2011 as well as to concerns about the way insurers deal with litigation, because the legal environment in Asia can be very different to the legal environments found in reinsurers’ home territories in Europe or North America.
By working together to address concerns in the Asian insurance market, reinsurers, clients and brokers can ensure that the treaties reflect the best outcome for all involved parties.