Insight and Intelligence on the 2017 Reinsurance Rendez-Vous de Septembre
13 SEPTEMBER 2017 12 SEPTEMBER 2017 11 SEPTEMBER 2017 10 SEPTEMBER 2017
WEDNESDAY TUESDAY MONDAY SUNDAY
Market holds breath as Irma approaches he global (re)insurance market is access to new sources of capital, albeit with thinly-capitalised local players following the Tmired in uncertainty as it follows the core returns under increasing pressure from drawback of the nationwides after earlier cat fate of Hurricane Irma, which has the compound rate reductions. events. potential to become the most expensive Sources have said that a $80bn-$100bn loss All buy to low attachment points and insured loss ever. would create signi cantly more distress, but will hand substantial losses to their treaty Irma, one of the most powerful storms in there is con dence that an event of this scale reinsurers, with the programmes of the history, has held the (re)insurance sector could be weathered without widespread nationwide and commercial writers also trans xed for days, with its projected failures. likely to deliver claims to cat writers despite track oscillating around the sector’s peak If the losses did mount to the their major retentions. exposures in Miami, and the stock market $125bn-$150bn range, sources suggested Traditional cat treaty reinsurers, operating oscillating in response to perceived clues on that market turmoil would ensue, with the with a global premium pool of around the possible scale of losses. potential for failures beyond the primary $20bn, could nd themselves carrying tens At the time of writing, the point where the Floridian property market, losses to the of billions of dollars of losses. storm will make landfall and its path along Lloyd’s Central Fund, and downgrades and The retro market will also be heavily the Florida peninsula remained unclear, capital raising even at some of the more impacted, with scope for most programmes although the latest National Hurricane respected companies. to be exhausted, given the relatively low Center forecasts suggested landfall on the Perhaps with this latter scenario in mind, return periods that cat writers typically buy west coast, with the city of Tampa potentially Sompo International CEO John Charman said to. receiving a direct hit. late last week: “It is the Night of the Long Florida is ground zero for the insurance- The insured loss quantum is highly Knives. Those who emerge at the end of linked securities (ILS) market and it will sensitive to the storm’s exact path. September will be worthy of it.” pick up swingeing losses from primary A direct hit on Miami – an increasingly reinsurance, retro and cat bonds. unlikely outcome – and an unfavourable Harvey vs Irma For Lloyd’s, with its cat treaty exposure and track up the coast opens the sector up Irma as a loss will contrast sharply with huge coastal wind exposures via its open to $150bn+ of losses, whereas a more its near predecessor Harvey. Harvey is a market, and particularly binders’, property favourable central path could see the storm ooding event that will be majority-retained books, as well as specialty lines like marine cost just a third of that. The west coast also by the primary market, with a signi cant and energy, Irma is set to be a clash loss. has a major concentration of insured values auto component and a highly uncertain and could su er a loss somewhere between commercial property loss quantum Early manoeuvres the two. concentrated in Houston. The extent of Irma’s impact is unclear, but This leaves insurers, reinsurers, retro Irma will be a wind and storm surge loss at minimum it looks likely to be the biggest providers and brokers in limbo as they wait concentrated in coastal Florida. The majority insured loss since Hurricane Katrina, which to determine where the loss falls within of the gross loss will come via Florida cost the industry around $50bn in 2005. the $50bn-$150bn range, and quite how homeowners’ policies, with a signi cant Then there is the complex and thorny loss distressed the sector will be. minority from commercial property and a from Harvey, which is creating signi cant At $50bn, (re)insurers would be dealing relatively modest auto tally. uncertainty around outwards reinsurance with a Katrina-size event at a time when The Floridian homeowners’ market, Continued on page 6 carriers have stronger balance sheets and particularly in coastal areas, is dominated by
04-05 Irma 10 Irma 15 Irma Florida reinsurance market Who writes the Florida Cat bond market in share analysis Cat Fund? the crosshairs INSIDE 08 Irma 13 Irma 32-35 Exec comp Citizens reinsurance PML analysis for US Run-down on the sector's programme, blow-by-blow wind losses highest earners
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MMC Advert-Jun17.indd 3 01/09/2017 14:57 NEWS COMMENT
Night of the long knives wards acceptance speeches are to have a rude awakening. external rivals were rounded up and killed Ausually quite predictable. And just as for a nervous traveller shutting and Hitler’s supreme grip on power was But when a Cat-5 hurricane is hurtling up the house before going on summer consolidated. towards Florida, predictability is the rst vacation, the lingering doubts and nagging Our version will be di erent – and happily casualty. questions were never far away: far healthier. Add to that one of the award recipients “Did I shut o the gas?” Our major events never allow a single being someone as independent-minded as “Have I cancelled the milk and winner to take all. Yes, the weak get killed, John Charman and the chance of a major newspapers?” but in our version of Depression-era surprise receives a big upgrade. The industry equivalents are: Germany, new parties would be formed, At the Insider Honours in London on “Do I really have an accurate handle on my the Nazis would be forced into coalition or Thursday night, Mr Charman told a aggregates?” out of government entirely and the Second 600-strong audience of peers that the “Will my reinsurance/retro perform the World War would never take place. industry was about to experience a “night Reinsurance and protection is not a one- of the long knives” in which some of the Out in the hall the mood party state - customers will not allow too suicidal decision-making of the past few was“ not quite sombre, but much power to be held in too few hands. years would be exposed. Prudent management of counterparty The deserving would come through the certainly less celebratory credit risk does not permit it. If we lose ordeal and those that had ignored the basic than in previous years some, we have to create some new ones to laws of our business would not. Out in the ” take their place. hall the mood was not quite sombre, but way I am expecting it to?” As I write, Irma’s track is shifting one way certainly less celebratory than in previous “Will the loss go into the gaps, or expose and another, as is its prerogative – but years. new ones?” Florida is de nitely going to be hit hard. There was a quiet con dence that “Will this event throw up new clashes that This is what we are here for. This is what everything that could be done had been I hadn’t thought of?” we have prepared for. Let’s do the right done – the pre-storm to-do list had been “Are the politicians going to make me pay thing by our customers and rise to the carried out to the letter. But a nervousness for things that are de nitely not covered immediate challenge of tomorrow and the was palpable. and for which I haven’t been collecting any weeks and months ahead. Good luck. A standard conversation with a senior premiums?” executive at a carrier on the night would The only rational answer to these begin with the con dent expression that questions is wait and see – all will be his or her organisation was sure it had its revealed next week and beyond. Mark Geoghegan, house fully in order. But in almost the same The original night of the long knives was Managing Director, The Insurance Insider breath that person would con de that they a savage purge carried out in Nazi Germany knew of at least two peers who were likely in the summer of 1934. Internal and [email protected] UK government backs Pool Re cyber plans tate-backed terrorism reinsurer Pool What we are really doing is future-proo ng on there being physical damage, Enoizi SRe has gained the UK government’s the cover.” explained. backing in principle to remove a cyber Pool Re is working with government He said the additional exposure caused by exclusion from its coverage and expects lawyers to formulate the necessary changes removing the exclusion could be o set by to o er protection for cyber events from to its underwriting manual and expects an increase in its members’ retention levels 1 April next year. to distribute revised documentation on 1 and Pool Re’s purchase of an estimated Pool Re CEO Julian Enoizi said removing October. £250mn-worth ($326.8mn) of additional the exclusion would mean that cover Speaking before the start of the Monte reinsurance protection that would sit for physical damage caused by remote Carlo Rendez-Vous, Enoizi said he would excess of the retention. digital interference by terrorists would be seek to add cyber cover to Pool Re’s own “We saw in November 2015 that Paris available to the scheme’s members. commercial reinsurance placement at the cafes and restaurants were inaccessible due The development is the culmination conference. to the police cordon. We began a dialogue of two years of work and marks the rst Pool Re has also proposed that the with the government and then events major change to Pool Re’s remit since cover government remove a non-damage caught up with us [in the UK]. for chemical, biological, radiological and business interruption (BI) exclusion from “What we did immediately was to propose nuclear attacks was added in 2002. the primary legislation that established the a solution. We said you can use the private “Clearly, it’s a very signi cant step for Pool scheme. The insurance market generally market to do this, but the most e cient Re,” said Enoizi. “For me, it’s absolutely the o ers cover for non-damage BI except in way to achieve the broadest possible [non- right thing to do because it evolves the the case of terrorism, whereas Pool Re’s damage BI] cover is to use Pool Re as the coverage in line with the evolving threat. ability to provide BI cover is contingent facilitator to get that cover out.”
DAY 1: SUNDAY 03 NEWS NEWS
Nephila and Everest lead concentrated Florida cat treaty market he top ve reinsurance writers in cedant. This was equivalent to 23 percent of Kilimanjaro Re cat bonds on risk, which TFlorida assume 23 percent of the the Floridian carrier’s total ceded premium. would provide $1.525bn of protection if market’s ceded premium, analysis by The Meanwhile, the fund manager assumed triggered. Insurance Insider has shown. $57.7mn of reinsurance premium from Meanwhile, analysis of the proportion of As Hurricane Irma bears down on the United P&C, equivalent to 22 percent of the any one cedant’s total ceded premium to Sunshine State, analysis of Schedule F lings total ceded, and $49.1mn from Heritage, the top ve reinsurers not only emphasises reveals a relatively concentrated cat treaty which accounted for 18 percent of the the market leaders’ dominance, but also market, with $761mn of premium ceded to insurer’s overall cessions for the year. highlights the counterparty credit risk the the top ve reinsurance writers in 2016. Nephila also has substantial relationships Floridians are taking on in their reinsurance Reinsurers of the biggest Floridian cedants with the People’s Trust, Florida Citizens and relationships. will bear the brunt of the loss from Irma, American Coastal Insurance Company, all of Seven out of the 17 carriers cede more along with their retro providers. which cede more than $15mn a year to the than 30 percent of their total ceded The Insurance Insider pulled data on ceded fund. premium to the top ve reinsurers, the most reinsurance premium from Schedule F The rm is one of two collateralised concentrated being Security First, which lings for the top 17 Floridian insurers by reinsurers to make the top ve, alongside cedes 53 percent of its total cessions to the market share. The numbers do not include Aeolus, which took on $85.3mn in premium top ve. nationwide writers AIG, USAA and Chubb in 2016. The next most concentrated are Safepoint, subsidiary Federated Insurance, whose large There are nine collateralised reinsurance with 48 percent, and Olympus, with 42 cessions skewed the overall data set, and entities in the data set, accounting for 13 percent. they are backward-looking. percent of all assumed premium. On the opposite end of the scale is State The Floridianresults reveal reinsurers the largest ranked private by assumed writer reinsurance premium: numbers 6-15 Farm’s Florida unit, which cedes just 1.5 of Florida reinsurance business is Nephila, Everest’s reach percent of its total cessions to the ve followed90 by Everest Re, Berkley Re, Aeolus Everest Re is hot on the heels of Nephila market leaders. and Tokio80 Millennium Re. in terms of Floridian ceded premium.76.5 The In fact, the carrier only has relationships Nephila70 captured $263.5mn of premium Bermudian assumed $208.1mn66.5 of premium with Tokio Millennium Re and Nephila out 60 55.3 58.1 through Allianz Risk Transfer, Poseidon Re 50.5from the top 17 carriers in 2016, equivalent of the top ve, and chooses to spread its 50 45.2 and Rubik Re40.2 – equivalent40.2 40.3to 8.1 percent40.7 of to 6.4 percent of the sample’s total cession. cessions more widely among global carriers total ceded40 premium across all 17 Florida However, Everest Re had the widest reach such as Swiss Re, Hiscox and Validus – carriers.30 in terms of relationships with Floridian potentially re ecting State Farm’s cedant The largest20 insurance-linked securities (ILS) cedants, having assumed premium from 16 relationships at a group level. fund manager10 assumed premium from 12 out of the 17 carriers in our data set. of the Floridian0 carriers in 2016, but draws In this sense, Everest Re spreads its Numbers 6 to 15 Reinsurance premium assumed ($mn) more than 90 percent of its premiums from exposure more widely than its peers, Global carriers feature more heavily in the Swiss Re Markel just six. MS Amlin with the polarTalbot) oppositePartnerRe being Berkley Re, second rank of reinsurers in the analysis, Elementum Chubb (inc. Sompo (inc. Validus (inc. RenRe (inc. Last year Nephila took on $66.6mnThird Point Re Tempestof Re) whichSompo assumed Intl) $123.2mnDaVinci from Re) just four including RenaissanceRe, Swiss Re and premiumSource: Company from lings, Universal The Insurance P&C, Insider its biggest relationships: American Integrity, Florida PartnerRe. Peninsula, Olympus and Safepoint. RenRe narrowly missed out on the top ve Top 5 Florida reinsurers Everest Re has extensively managed its with total assumed premium of $76.5mn, Top 5 Florida reinsurers exposure to US wind risk via its Mount when including premium taken on by its by cededby ceded premium premium Logan Re sidecar and numerous sponsored DaVinci rated sidecar, but the story may well catastrophe bonds. have been di erent if the Florida cat fund 300 263.5 As Irma approaches the Florida peninsula, had been included in the analysis. 250 the reinsurer currently has 10 of its 208.1 200 Largest Nephila Everest Re has 150 123.2 widest Florida reach 85.3 Florida accounts 100 80.9 Reinsurer No. of cedant Total assumed Cedant Ceded premium ($mn) 50 relationships reinsurance premium Universal P&C 66.6 ($mn) 0 United P&C 57.7 Everest Re 16 208.1 Reinsurance premium assumed ($mn) Aeolus Heritage 49.1 Tokio Millennium Re 13 80.9 Berkley Re Everest Re People’s Trust 43.0 Nephila (ART, Poseidon 12 263.5 Re, Rubik Re) Re, Rubik Re) Tokio Millennium Citizens Property Insurance 22.5 Aeolus 6 85.3 Nephila (ART, Poseidon American Coastal Insurance Company 16.3 Berkley Re 4 123.2 Source: Company lings, The Insurance Insider Combines ART, Poseidon Re, Rubik Re Source: Company lings, The Insurance Insider Source: Company lings, The Insurance Insider
Top 5 account for 23% of 04 Floridian ceded premium DAY 1: SUNDAY
2.5% 2.6%
3.8% 6.4%
8.1%
76.6%
Tokio Millennium Re Aeolus Berkley Re Everest Re Nephila Rest of market
Source: Company lings, The Insurance Insider NEWS NEWS
RenRe writes a $375mn line on the Florida increase its retro support from the vehicle by Endurance’s acquisition of Montpelier Re, a HurricaneFloridian Catastrophe reinsurers Fund ranked programme, by assumed reinsurance$100mn in premium: the past year. numbers 6-15 major Florida cat writer. along with its DaVinci Re vehicle. Sector Re is predominantly a highly Other reinsurers to make it into the top The reinsurer’s90 largest relationship in the diversi ed global reinsurance sidecar, 15 included Markel Re, which was pushed data set80 is with Homeowners Choice, from although it is understood some 76.5layers into the bracket by a $27.5mn cession which70 it received $22.7mn of premium, provide US-speci c retro66.5 support. from People’s Trust in particular, and closely60 followed by Universal, which ceded Sompo55.3 also featured58.1 in the top 15, due to Chubb Tempest Re, which holds ceding 50.5 $20.8mn.50 Combined, these two cedant 45.2 its acquisition of Endurance – now Sompo relationships with 14 out of the 17 cedants 40.2 40.2 40.3 40.7 relationships40 accounted for more than half of International – which assumed a total of in the data set. MS Amlin and collateralised RenRe’s total assumed premium from the 17 $54.3mn of premium in the year alone. reinsurer Elementum were also among the 30 Floridians. Much of it is likely to have been a result of top 15 reinsurers. 20 PartnerRe came in seventh, with $66.5mn 10 of assumed premium, while Validus’ $58.1mn 0
of assumedReinsurance premium assumed ($mn) premium ranked the reinsurer Floridian reinsurers ranked by assumed eighth. Swiss Re Markelreinsurance Floridian reinsurers premium: ranked numbers by assumed 6-15 reinsurance premium: numbers 6-15 On a full-year 2016MS Amlin results call, Validus Talbot) PartnerRe Elementum Chubb (inc. Sompo (inc. Validus (inc. RenRe (inc. Third Point Re Sompo Intl) DaVinci Re) management commented on extra Tempest Re) 90 worldwideSource: Company aggregate lings, The Insurance protection Insider it had 80 76.5 purchased at 1 January, which may prove to 66.5 be a prudent decision in light of Irma. 70 60 55.3 58.1 ValidusTop Re 5 buys Florida $325mn reinsurers of aggregate retro 50.5 excess $275mn, although losses from Harvey 50 45.2 by ceded premium 40.2 40.2 40.3 40.7 will already have signi cantly eroded that 40 300 deductible. 263.5 30 Kean250 Driscoll, Validus Re CEO, said the 20 group’s US wind 1-in-100-year 208.1probable 200 10 maximum loss (PML) at 1 January was down 0
by 6.5150 percent on the same123.2 renewal last year. Reinsurance premium assumed ($mn) “The100 decrease80.9 in85.3 PML is a result of our Swiss Re Markel disciplined underwriting, enhanced MS Amlin Talbot) PartnerRe 50 Elementum Chubb (inc. Sompo (inc. Validus (inc. RenRe (inc. retrocessional purchases and the shift of Third Point Re Tempest Re) Sompo Intl) DaVinci Re) more capacity0 to AlphaCat,” he said. Source: Company lings, The Insurance Insider
SwissReinsurance premium assumed ($mn) Re is another carrier in the top Aeolus 15 that may bene t fromBerkley ReitsEverest sidecar Re arrangements in managing its US Re,wind Rubik Re) CedantTop 5analysis Florida methodology reinsurers exposure.Tokio Millennium The giant reinsurer expandedNephila (ART, its PoseidonSector Re The Insuranceby ceded Insider premium pulled data on level cessions skewed the overall data sidecarSource: Companyto $492mn lings, The midway Insurance Insider through 2017 to ceded300 reinsurance premium from set. Schedule F lings for the top 17 263.5 Units of reinsurers were grouped 250 Floridian insurers by market208.1 share. together to provide assumed premium TopTop 5 5account account for for 23% 23% of The200 data is broken down by cedant and totals at a group level – for example, the by reinsurer, to provide a granular level RenRe entry includes its Lloyd’s syndicate ofFloridian Floridian ceded ceded premium premium 150 123.2 of data. and permanent sidecar DaVinci Re. 100 80.9 85.3 2.5% 2.6% The top 17 cedants featured in The reinsurer sample does not include this analysis50 were: Universal P&C, catastrophe bonds, but does feature 3.8% Citizens, Heritage, Federated National, sidecars, captives and other collateralised 0 6.4% Homeowners Choice P&C, Security vehicles.
First,Reinsurance premium assumed ($mn) United P&C, People’s Trust, First Also excluded from the reinsurers’ 8.1% Aeolus Protective, AmericanBerkley Integrity, Re Everest Florida Re sample is the Florida Hurricane Peninsula, Florida Family, Olympus,Re, Rubik Re) Catastrophe Fund (FHCF), which is the Tokio Millennium Safepoint, American Coastal, ASI largest receiver of cessions in the market Nephila (ART, Poseidon 76.6% Preferred, and State Farm’s Florida unit. but is state-backed, and therefore not Source:This Companygroup lings,ceded The aInsurance total Insiderof $3.25bn of comparable for the purposes of this premium to reinsurers in 2016, according analysis. to tallies disclosed on Schedule F lings. A scaled-back look-up table showing Tokio Millennium Re Aeolus TheTop data 5 set account does not include for 23% of ceded reinsurance premium relationships Berkley Re Everest Re nationwide writers AIG, USAA and for the top 10 Floridian cedants and the FederatedFloridian National, ceded which premium do not top 40 reinsurers, alongside the FHCF, Nephila Rest of market provide a Schedule F breakdown for their will be published in tomorrow’s Monte 2.5% 2.6% Source: Company lings, The Insurance Insider Florida units, and whose large group- Carlo daily edition. 3.8% 6.4%
DAY 1: SUNDAY 8.1% 05
76.6%
Tokio Millennium Re Aeolus Berkley Re Everest Re Nephila Rest of market
Source: Company lings, The Insurance Insider NEWS
Continued from page 1 west, reducing the likely quantum of losses. The marketplace also has major exposure Market scepticism remains about the ability to Floridian cat treaty business, and the protection for those with meaningful of the models to accurately calculate the broader US cat market. exposure. Nevertheless, seasoned industry loss, given past misses. Insurers are likely to The pending losses come at a time when sources have pegged Harvey at an industry face a welter of “unmodelled” issues after the market was already running at an loss of $25bn-$30bn in recent days – making the storm, with the assignment of bene ts accident-year loss ratio of more than 100 this hurricane season’s supporting act bigger issues set to hurt insurers badly and political percent even with a relatively benign cat than 2012’s Sandy. pressure to pay out likely to be irresistible. experience, and with ratings agency scrutiny Carriers have already started jockeying for The di culty in maintaining ood growing. There will be winners on the position post-event, either with a view to exclusions was again demonstrated last carrier side too. Munich Re looks relatively bolstering their capital position and limiting week, when the MTA won a victory against underweight in Florida. Berkshire Hathaway their downside from events in the remainder its insurers, which had looked to impose – the ultimate hard market carrier – has cut of the year, or to exploiting the anticipated a sub-limit on its Sandy loss – one of the its US cat treaty and retro books to the bone correction in pricing. biggest single hits from the 2012 event. in recent years. Richard Brindle’s Fidelis will As of Friday (8 September), at least 10 or Other practical issues include the dearth bene t from its relative youth. 12 cedants had solicited quotes on back- of loss adjusters and the demand surge MS Amlin, Tokio Millennium Re and John up reinsurance or retro deals. A mutually that is likely to force replacement costs up Charman’s Sompo International will be acceptable price on back-up covers has signi cantly, further in ating claims. strongly positioned thanks to the substantial proved almost impossible to reach in most The latter two issues are just another liquidity of their parents. The brokers will cases with Irma’s impact so unclear, but the example of the way in which Harvey and bene t from rising brokerage as they place market is expected to spring to life next Irma will intriguingly interact to shape the back-ups and more highly rated renewals, week as reinsurers con dent in their own market outcome and, thus, the way renewals with some evidence of share price gains loss and capital position look to capitalise. are approached. already. However, soft market tactics from those in a strong position are likely to di er. Some Asymmetry Market impact will opportunistically o er capital where The Floridian primary market will fare worst Rate rises in the US property cat treaty it can garner the highest returns, writing in the loss, according to broking sources. market seem certain at 1 January. The so-called “survival retro” at penal rates. Most of the Florida homeowners’ writers magnitude is di cult to predict, but the Others will concentrate their capacity ostensibly buy to a 1-in-100-year return 200 and 300 percent increases seen post- on supporting core clients. Some may period to satisfy ratings agency Demotech, Hurricane Andrew are not expected by withhold their capacity altogether, at least but there is scepticism among both brokers anyone. The scale and longevity of the rate in the short term, as they manoeuvre for and underwriters that their programmes rises is likely to depend heavily upon the maximum advantage. “Let the weak die,” one truly reach these exhaustion points. success of the ILS market in weathering the underwriting source said grimly. E orts are already underway to determine loss and reloading. The market for back-up covers will draw which are most likely to go through the It is clear there are pension funds that oxygen from the fact that more than 50 top of their reinsurance programmes, and would be willing to put new money to work percent of the risk in the Atlantic hurricane failures are expected in some quarters. in the sector despite their losses, but others season is outstanding, with the formation of Attempts to rebuild are likely to be are likely to succumb to fear and hold back. Jose and Katia underscoring the point that hampered by punitive reinsurance rates and There will be no class of 2018. The yet another landfalling storm is possible. the di culty of adequately raising primary structures for capital to enter the space – Carriers with potential access to third party pricing. either via sidecars or fund management capital are also rapidly mobilising, with a The ILS market will su er platforms – already exist. number of ILS funds and reinsurer-asset disproportionately in the loss, with some New company formation is too slow and managers already holding discussions and sources forecasting a hit of $30bn-$40bn to cumbersome – with the sector already overly looking to draw down funds. a total capital base of $80bn if Irma in icted fragmented – although incumbents could $100bn of sector losses. look to capital raises, potentially via private Longer term This would include heavy cat treaty equity for reasons of speed. By nightfall on Sunday the market will losses in Florida where Nephila, Aeolus Some underwriting sources have drawn have a good sense of the storm track and and Elementum have big exposures; major parallels with 1999-2001, when a highly soft the wind speeds at landfall, allowing the cat bond losses to the $12bn of exposed market and disastrous casualty results driven loss to be modelled. To date the modelling cat bonds; and close to total losses to by under-reserving collided with the 9/11 agencies have been reticent in issuing US-exposed retro programmes, including the shock loss. numbers. RMS broke its silence on Friday industry loss warranty market. However, despite mounting competitive afternoon to tell The Insurance Insider that As much as 85 percent of the retro market challenges and compressed returns, the early indications suggested that there was is written on a collateralised basis, with the market’s underlying results have not been as a 90 percent chance that the wind loss dominant players including Catco, Aeolus weak as at that point. would be $85bn or less. Karen Clark released and Nephila. Irma is clearly a market-changing event, a range of pre-landfall loss simulations to Market sources expected Lloyd’s to take with excess capital nally taken out of the Dowling which showed that, based on tracks a heavy hit after years of growing coastal sector and the potential for consolidation from Thursday at 6pm Eastern Time, the property exposures, with big books written through distressed M&A. But it is impossible claims burden could be $137bn-$150bn. via MGAs including Amrisc, Arrowhead, Icat to say more than that until the event has run The projected wind track has since moved and Catalytic. its course.
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Citizens and reinsurers braced for Irma
lorida Citizens faces arguably the Citizens’ budgeted loss ratios for this wrote $65.1mn or a 6.3 percent line. Fbiggest nancial and administrative year include a provision for average non- Everest Re, another of the biggest players challenge in its 15-year life as Hurricane hurricane catastrophe activities but no in Florida, has a $159.3mn line, up 62 Irma heads towards southern Florida provision for hurricanes. percent year-on-year, while fourth-placed shores. It renewed its reinsurance on 1 June, Munich Re more than quadrupled its line to Among its reinsurers, Nephila and Validus increasing its spend by 55 percent year- $70mn. have the largest overall exposure to the on-year in buying a $1.03bn reinsurance state-owned carrier’s potential losses. programme. Florida Citizens reinsurers A direct hit from Hurricane Irma to Miami, However, owing to falling exposures, it Carrier Line size (mn) where property values have soared in recent reduced the overall size of its risk transfer Domestic reinsurers years, could generate insured losses of well programme by allowing $1.5bn of cat bonds American Standard $3.520 over $100bn. to mature without replacing them. Everest Re $159.260 But even if it makes landfall further up the The residual insurer currently has $300mn Mapfre Re $3.150 coast the event could be devastating, given of cat bonds in issuance. Munich Re America $70.040 the preponderance of high-value property As many as 28 di erent groups and OdysseyRe $0.700 along the Florida shoreline. a liates participate on its programme, Swiss Re America $25.250 For Citizens, the hurricane follows months but the top 10 writers have more than 90 Domestic total $261.920 in which it has borne the brunt of an percent of the slip. Bermuda reinsurers explosion in assignment of bene ts (AOB) The total collateralised share was more Argo Re Ltd $1.000 litigation. than a third of Citizens’ $1.0bn cover, or Ariel Re Bermuda Ltd (o/b/o Lloyd’s Syndicate 1910) $12.650 In its 2017 annual budget it named $372mn, compared with 24 percent of last BGS Services (Bermuda) Ltd (o/b/o Lloyd’s Syndicate $2.000 additional litigation claims as one of the year’s programme, perhaps re ecting the 2987 – Brit) two largest sources of disruption this year, larger lines handed to insurance-linked Fidelis Insurance Bermuda Ltd $24.200 alongside private market contraction. securities (ILS) players that had maturing cat Pillar Capital Management (fronted by Hannover $12.790 Rück SE) That contraction, or repopulation, has bonds. RenaissanceRe $61.222 arisen as AOB-struck carriers have withdrawn The lead reinsurer was ILS manager Sirius International $3.850 capacity and means that Citizens’ own Nephila and related entities, whose line of Validus Re $184.180 exposure, particularly in personal lines, will $286mn was equivalent to 27.8 percent of Bermuda total $301.890 probably rise in the second half of the year. the total. International reinsurers Even before Irma reared its head, Citizens Bermudian (re)insurer Validus wrote an Allianz Risk Transfer $26.400 had predicted that its loss ratio would 18.3 percent line in aggregate across the Humboldt Re $10.105 deteriorate because of litigation claims, three covers in deploying $189mn of limit, as Kelvin Re $10.105 pushing its personal lines account to a net it pared back its share from 2016. International total $46.610 loss in 2017. Its fund management arm AlphaCat also Accessed through GC/Willis UK General Insurance Corp of India $2.640 Citizens rm orderCitizens terms rm order terms Lloyd’s Syndicate 0435 – Faraday $3.905 Lloyd’s Syndicate 0780 – Advent $0.700 PML return time Total coastal Lloyd’s Syndicate 1183 – Talbot $4.450 Single Aggregate loss and LAE Lloyd’s Syndicate 1458 – RenRe $5.440 100 92 $4.287bn Lloyd’s Syndicate 1729 – Dale $0.875 CNR – Lloyd’s Syndicate 2001 – Amlin $15.475 Surplus – $0.549bn $0.101bn Lloyd’s Syndicate 2007 – Novae $3.870 79 73 $3.673bn 78 72 Lloyd’s Syndicate 2791 – MAP $5.000 2017 $3.630bn 34% of $0.880bn 2017 traditional aggregate CNR Lloyd’s Syndicate 2987 Brit $1.425 Everglades Re II (Multi-year/single year) (Occ) $880mn $0.100bn CNR – MS Amlin Bermuda $1.500 2017-1 aggregate 66% of $0.880bn xs $0.504bn (50% of $0.100bn cat bond with FHCF and wrap inuring $0.200bn Pioneer Underwriting (o/b/o Cathay Century $0.700 xs Insurance Co Ltd) 47 43 $0.406bn) $2.576bn 2017 wrap (Occ) – $0.350bn Pioneer Underwriting (o/b/o Peak Reinsurance $1.500 45 41 100% xs $0.504bn with FHCF inuring CNR – $0.013bn $2.461bn 43 39 $2.384bn Co Ltd) GC/Willis UK total $47.480 FHCF coverage – Collateralised reinsurance $1.297bn CNR – $0.298bn AlphaCat Re $65.120 (90% of $1.441bn xs $0.437bn) LGT Capital (Collateralised Re Ltd) $47.300 13 12 Surplus– $0.770bn Poseidon Re Ltd (Nephila) $238.438 $0.023bn 11 10 $0.576bn Rubik Re (Nephila) $21.162 LAE – CNR – Surplus – $0.437bn $0.044bn $0.095bn Collateralised total $372.020 Grand total $1,029.920 Source:Source: The InsuranceThe Insurance Insider Insider Source: The Insurance Insider
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Florida cat fund vulnerable to worst-case Irma
lorida’s homeowners’ insurers are RenaissanceRe and Swiss Re dominating the of the debt markets to secure bonding Fheavily reliant on a state-backed $1bn private market coverage. capacity, which could potentially lead to reinsurance vehicle that entered the 2017 The cover, bought by the FHCF for the last post-event nancing problems in tight hurricane season in its strongest ever three years, includes $375mn of limit from credit markets such as those seen in the nancial position. RenaissanceRe and its DaVinci vehicle and nancial crisis. After years of benign storm activity in $175mn from Swiss Re (see table). In its latest report in May this year, the the Sunshine State, the Florida Hurricane The next participants are some way fund’s adviser Raymond James estimated Catastrophe Fund (FHCF) has $17.6bn behind these carriers, with Zurich-based that in the rst 12 months from that point of liquid resources on hand to meet its insurance-linked securities manager LGT’s the FHCF would have bonding capacity of maximum liability to carriers of $17.0bn, Collateralised Re putting down $75mn, some $8.1bn – an amount $400mn higher including $14.9bn of cash and $2.7bn in Arch Re $60mn and Validus and its asset than in October 2016 and $500mn higher pre-event bonds. management platform AlphaCat taking than in October 2015. Based on those claims-paying resources, $50mn and $40mn respectively. If it chose to leave its pre-event proceeds it would take a hurricane event resulting Sompo Canopius Syndicate 4444 wrote outstanding and issue post-event bonds to in ground-up losses exceeding $26.0bn to $35mn and a handful of other carriers wrote meet its maximum obligation for the 2017- exhaust the FHCF’s cash balance. between $10mn and $20mn, including 2018 hurricane season, it could then use The FHCF, which was formed in the Tokio Millennium Re, Hiscox and Chubb its bonding capacity of $8.1bn, pre-event aftermath of Hurricane Andrew, also has Tempest Re. bonds and reimbursement premiums for a a $1bn reinsurance programme in place Major Floridian carrier Nephila only put total estimated claims-paying capacity of that kicks in when industry losses to Florida down $20mn on the programme this year. $11.4bn. insurers reach $18.5bn. The state reinsurance scheme paid a That would represent 67 percent of its This is because the fund begins paying out $61mn premium for this year’s cover, which potential maximum obligation for the 2018- itself when industry losses hit $7bn and the was a 4 percent face-value discount to last 2019 season of $17.0bn. reinsurance layer triggers when FHCF losses year’s rate. It would then need to nd an additional reach $11.5bn. According to FHCF meeting materials, $5.6bn in funding to reach its statutory But with worst-case scenario projections the $11.5bn trigger level on its reinsurance obligation for that storm season. for potential Irma losses set well above the represents a payout for a 1-in-32-year storm. FHCF limit forms a signi cant part of resources of the cat fund and its reinsurance A total loss to the cat fund would leave reinsurance structures put in place by as the storm advanced on Florida, the FHCF the FHCF needing to re nance if it is to Florida’s homeowners’ insurers. could face a complete blowout. form a meaningful part of the reinsurance Participating insurers pay into the fund Under such a scenario, its own outwards structures put in place by the state’s each year, with their premiums based in part programme would be a total loss, with homeowners’ carriers in the coming years. on the value of the property they cover and In the event that a storm burns through the level of coverage they select. FHCF reinsurers cash resources at the cat fund, it can either Insurers can set their participation level $10mn+ lines only call on pre-event bonds already issued, or in the FHCF cover at 45 percent, 75 percent Company Participation ($mn) look to go to the capital markets and issue or 90 percent, potentially lowering the limit RenaissanceRe 262.5 post-event bonds. they buy from the vehicle and replacing it Swiss Re America 175 That leaves it largely reliant on the state with cover from the private market. DaVinci Re 82.5 Collateralised Re (LGT) 75 FHCF 2017/18 claims paying ability Arch Re 60 FHCF 2017/18 claims paying ability Validus Re 50 Ground up Return Probability AlphaCat 40 losses time (%) ($bn) (years) Lloyd’s Syndicate 4444 (Sompo 35 $28.7bn 45.9 Canopius) 2.18% $2.1bn potential Lloyd’s Syndicate 1458 (RenRe) 30 $2.1bn of $2.7bn – pre-event bonds post-event Tokio Millennium Re 20 $26.0bn 39.5 2.53% bonding Nautical Management / Lloyd’s 20 Syndicate 2357 (Nephila) American Standard Ins Co of 15 $14.9bn projected 2017 Wisconsin year-end fund balance $14.9bn cash $2.7bn 2013A & 2016A bonds Chubb Tempest Re 15 $18.5bn $1bn reinsurance programme $17.6bn total resources co-payments
Hiscox Ins Co (Bermuda) 15 $5.4bn industry -$17.0bn statutory limit Korean Re 12 $0.6bn preserved for Argo Re 10 subsequent season Markel Bermuda 10 $7.0bn 9.5 10.47% Post-event bonding XL Bermuda 10 $7.0bn industry retention capacity May 2017 Lloyd’s Syndicate 1910 (Ariel) 10 $8.1bn Source: FHCF Source:Source: FHCF FHCF
10 DAY 1: SUNDAY
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partnerre.com NEWS
1-in-250 US hurricane event exposures as % of shareholders' equity 30
23.8% 24.0% Everest’s wind PML25 produces 19.0% 20 14.8% 15.1% 13.8% 14.0% 14.5% biggest Irma loss15 impact 12.7% 10.9% 11.0% 11.2% 11.5% robable maximum loss (PML) data PMLs for this return period. Munich Re PML numbers. Chubb disclosed a potential 10 7.6% released by most of the major discloses a projected EUR4.4bn loss from a net claims burden of $3.07bn for a 1-in-100- P 4.9% (re)insurers indicates that Everest 1-in-200-year5 3.3% event,3.8% which represents 13.8 year event, which is 6.4 percent of its equity Re could take the most signi cant percent of equity. base.
Net loss as % of shareholders' equity Net loss as % of shareholders' 0 loss relative to its capital base from a Despite moves to scale back its exposure, AIG said that its 1-in-100 PML for a Florida Arch Axis Swiss ReMaiden is still more exposed thanChubb Munich storm is only $1.28bnAspen or 1.7 percentValidus of Everest 1-in-100-year storm. Swiss Re* XL Group Alleghany Lancashire Allied World Munich Re*Sompo Intl Irma, a Category 5 hurricane, was expected to a 1-in-200-yearThe Hartford event, withGreenlight an Re Atlantic Hannoverequity, Re something that may point to the
to make landfall in Florida over the weekend hurricane* 1-in-200 year PMLevent; Data of correct $5.1bn as of latest or PML14.8 disclosures percent of under-exposure of the nationwide writers, after wreaking havoc in the Caribbean. equitySource: Company at year-end lings, The Insurance 2016. Insider which have drawn back from Florida over Everest Re expects a projected $1.54bn Some of the US primary players also issue the last decade. loss from a 1-in-100-year southeast US wind event as of the end of 2016, equivalent to 1-in-100-year US windstorm exposures as % of shareholders’ equity 19.1 percent of shareholder equity. 1-in-100-year US windstorm exposures as % of shareholders' equity For a 1-in-250-year storm this would rise to 25 $1.93bn, or 23.8 percent. Bermudian peer Validus disclosed a PML 20 19.1% of $602mn for a 1-in-100-year US hurricane event as of the end of Q2, which would 15 13.0% represent a 13.0 percent hit to shareholder 11.5% 10.6% 9.6% 10.3% equity. 10 9.4% 7.9% 8.0% 8.2% Its exposure at a 1-in-250-year return 6.4% 5.1% period rises to $880mn, or 19.0 percent of 5 shareholder equity. 1.7% Net loss as % of shareholders' equity Net loss as % of shareholders' RenaissanceRe, one of the biggest 0
catastrophe reinsurance writers in Florida, AIG Axis Chubb Hiscox Aspen Validus Everest does not disclose its PMLs, but Schedule XL Group Alleghany Sompo Intl Lancashire F analysis run by this publication has Hannover Re Allied World Data correct as of latest PML disclosures previously shown it is one of top 10 Source: Company lings, The Insurance Insider reinsurers in Florida by assumed reinsurance premium. London-listed Lancashire is the next most Lloyd’s writers cede out wind risk exposed, with a PML of $156mn for a non- Gulf of Mexico US hurricane at a 1-in-100- Disclosures on realistic disaster $1.03bn gross exposure, based on year- year return period. This represents 11.5 scenarios at Lloyd’s carriers show end 2016 numbers. percent of shareholder equity. that some make signi cant use And Beazley disclosed in its most recent However, Lancashire, a major writer of high of reinsurance to limit their net annual report that a Gulf of Mexico reinsurance layers, is the most exposed to a exposures. windstorm generating a $112bn industry 1-in-250-year event, with its PML equivalent Based on its 2016 annual report, MS loss would leave it with gross losses of to 24.0 percent of equity. Amlin’s reinsurance arrangements reduce $623mn. This falls to $215.3mn post- The broader Bermuda market has high its net exposure to a Florida windstorm reinsurance, which is equivalent to almost single-digit exposure to a 1-in-100-year in Tampa by about £1.0bn ($1.3bn). This 15 percent of the syndicate’s total equity. US wind event. Based on the most recent scenario would generate a gross loss of Novae does not disclose gross estimates, available disclosure, Sompo International £1.23bn for the carrier, which falls to a but disclosed a $95mn expected net would absorb a 10.6 percent hit, Allied World £271mn loss after reinsurance. exposure to a $75bn Florida windstorm 10.3 percent, Aspen 9.6 percent, Hannover Similarly, Hiscox’s reinsurance means its event, which would be equivalent to Re 9.4 percent, XL 8.2 percent and Axis 8.0 exposure to a $125bn Florida windstorm more than 31 percent of shareholders’ percent. These projected losses widen to a falls to a $178mn net loss from an initial equity. 10-15 percent range if a 1-in-250-year return period is used. Lloyd’s exposure Disclosure from the continental reinsurers Syndicate Peril Exposure Total equity Exposure relative to equity (%) is patchy. Hannover Re reported at year- Novae Florida windstorm ($75bn insured loss) $95,000,000 $303,100,000 31.34 end 2016 that its exposure to a 1-in-100 US MS Amlin Florida windstorm, Tampa (1-in-100-year event) $355,000,000 $4,235,101,010 8.38 and Caribbean hurricane was EUR850mn Hiscox Florida windstorm ($125bn industry loss) $178,000,000 $1,858,843,000 9.58 ($1.0bn), or 9.5 percent of shareholder Beazley Gulf of Mexico windstorm ($112bn industry loss) $215,300,000 $1,506,100,000 14.30 equity. Source: Company lings Munich Re and Swiss Re do not provide
DAY 1: SUNDAY 01313 SCOR’s strength stands out clearly
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“SCOR’s success story continues. Over the past 15 years, the Group has overcome obstacles, faced economic and financial crises, and absorbed major natural catastrophes. Throughout this long journey, SCOR has held its course. SCOR has achieved the solvency and profitability strategic targets set out in its successive plans. It has grown, reinforced its financial strength and expanded and deepened its franchise. It has diversified its portfolio and developed a superior risk management strategy. Today, SCOR is a truly global group. The upgrade of our rating to A+ by A.M. Best on September 1st, 2017, which follows the upgrade to AA- by S&P and Fitch in 2015 and to Aa3 by Moody’s in 2016, once more demonstrates the relevance of SCOR’s business strategy and confirms SCOR as a Tier 1 global reinsurer. The Group’s strength is a clear benefit for our clients.”
Denis Kessler Chairman & Chief Executive Officer www.scor.com TRADING RISK
Irma threatens more than 40% of cat bonds lorida-based carriers have sponsored be on risk for future storms this season if reinsurance towers, some small higher-risk Fabout $1.9bn of cat bonds across a they are not immediately impacted by Irma. layers have very low retentions – such as wide range of risk levels, but the bulk While many of these cat bonds tend to some of the Casablanca Re layers for Avatar of the cat bond portfolio threatened by be placed towards the top of Floridians’ and one Manatee layer for Safepoint. Hurricane Irma is made up of multi-peril issuances with national US exposure. Cat bonds for Floridians Almost $12bn of the cat bond market is Bond Sponsor Final size Coverage Initial trigger exposed to a rst-event US wind loss in ($mn) ($mn) Florida, according to data compiled by sister Everglades Re II 2017-1 class A Florida Citizens Property Insurance 300 Annual aggregate 2151 publication Trading Risk. Sanders Re 2017-2 Castle Key (Allstate) 200 Per occurrence cascading Unknown First Coast Re 2017-1 class A Security First Insurance 175 Per occurrence cascading 691 This constitutes 87 separate cat bond Citrus Re 2015-1 A Heritage P&C Insurance Company 150 Per occurrence (cascading) 1480 layers that represent more than 40 percent Citrus Re 2017-1 Heritage P&C Insurance Company 125 Per occurrence cascading Roughly 1,000 of the total $27.8bn of cat bonds issued Manatee Re 2015-1 A Safepoint Insurance Company 100 Per occurrence cascading 265 since 2014 that are still on risk. Integrity Re 2017-1 Class C American Integrity Insurance 100 Per occurrence cascading 736 The total cat bond market exposure to Citrus Re 2015-1 B Heritage P&C Insurance Company 97.5 Per occurrence (cascading) 560 a US wind event is higher, at roughly two Manatee Re 2016-1 A Safepoint Insurance Company 75 Per occurrence cascading 306 thirds of non-life volumes – or almost $17bn First Coast Re 2016-1 Security First Insurance 75 Per occurrence (cascading) 1,110 when second-event covers and northeast Casablanca Re 2017-1 A Avatar P&C Insurance Company 66.95 Per occurrence cascading 374.4 or single-state bonds outside Florida are Market Re 2017-1 Not disclosed 65.1 Per occurrence cascading Unknown included. Oak Leaf Re 2017-1 Southern Oak 53.995 Per occurrence, annual aggregate Unknown Florida-based carriers have sponsored Integrity Re 2017-1 Class D American Integrity Insurance 35 Per occurrence cascading 701 about $1.9bn of cat bonds across 20 layers. Citrus Re 2015-1 C Heritage P&C Insurance Company 30 Per occurrence (cascading) 360 Many provide cascading cover that can Casablanca Re 2017-1 B Avatar P&C Insurance Company 26.3 Per occurrence cascading Roughly 88 trigger below their initial attachment point Manatee Re 2016-1 C Safepoint Insurance Company 20 Per occurrence cascading 30 if other reinsurance cover has been wiped Casablanca Re 2017-1 C Avatar P&C Insurance Company 6.75 Per occurrence cascading 25 out by a rst event. That means they could Source: Trading Risk Reinsurers stack up cat bond cover he carriers with the most cat bond Biggest sponsors of Florida wind-exposed cat bonds Tcover for Florida wind are Everest Sponsor Amount ($mn) Bonds Risk/peril and territory Re, USAA, XL and Heritage, according to Everest Re 2,325 Kilimanjaro 2014 + 2015 + 2017 Named storms and quake in US, Puerto Rico Trading Risk data. USAA 1,630 Residential Re 2016 and 2017) US named storms Everest Re leads the way, with $2.3bn of XL Bermuda 1,875 Galilei 2016 and 2017, Galileo 2015 US multiperil cover from Kilimanjaro Re issuances in 2014, Heritage P&C 687.5 Citrus Re 2015, 2016,2017 US wind (Florida) + US named storms 2015 and 2017. Nationwide Mutual 675 Caelus Re 2016 and 2017 US multi-peril USAA’s cat bonds Residential Re 2016 and Scor Global P&C 450 Atlas IX Capital 2015&2016 US and Canada wind and quake 2017 provide the carrier with a total $1.6bn Allianz Risk Transfer (Nephila) 410 Blue Halo Re 2016-1, 2016-2 US named storms and quake of cover, while XL can draw on $1.8bn of AIG 400 Tradewynd Re 2014-1 US named storms Munich Re 390 Queen Street bonds US hurricane, Australia cyclone, US wind (hurricane), Galileo and Galilei issuances. European wind Heritage has $687.5mn of cover Axis 350 Northshore Re II US named storms from Citrus Re 2015, 2016 and 2017. It Catlin Insurance Company 300 Galileo Re 2015-1 A US named storms highlighted the multi-year cat bond cover Florida Citizens 300 Everglades 2017 US wind (Florida) as it outlined last week how much it will rely Castle Key (Allstate) 200 Sanders Re 2017-2 Florida named storms on reinsurers to pick up Irma claims. Tokio Millennium (Credit Suisse) 160 Spectrum Re 2017-1 US multi-peril and Canada quake ILS managers too have used cat bonds Source: Trading Risk to hedge their portfolios, with Nephila sourcing $410mn of Blue Halo cover via Few trades were occurring on the post-event, they added. Allianz Risk Transfer. secondary cat bond market as Irma headed One Citrus Re 2017-1 bond was heavily State-backed Florida Citizens Property towards Florida. written down – despite not being the most Insurance’s Everglades Re II 2017-1 class A Uncertainty and a wide range between at-risk of the Citrus bonds – dropping to issuance is the largest bond, at $300mn. what sellers were o ering and what buyers 50.0 cents from 100.5 cents on a $1mn It covers Florida named storms over a were willing to bid had also restricted trade. three-year term on an annual aggregate, trading volume on the cat bond market, S&P Global Ratings estimated that 13 cat indemnity basis. sources said. bonds may be at risk from the threat posed The Everglades cat bond forms part of a However, bonds without exposure to by Hurricane Irma, based on its ratings data broader $880mn aggregate layer excess of Hurricane Irma were being o ered, as – which covers only a very limited scope of $504mn within the programme this year. investors sought to free up capital to act the cat bond market outstanding.
DAY 1: SUNDAY 15 BIG QUESTION: MARKET CONDITIONS
As the great and the good of the reinsurance industry gather at Monte Carlo, we ask some of the market’s top executives to set the scene ahead of this year’s Rendez-Vous
What is your early take on the way that become so competitive that current it may be o a little, but I don’t expect overall market dynamics are shaping up economics simply aren’t sustainable. Loss continued large decreases. That market is for 1 January? ratios have been running higher than more or less at the bottom. Overall, there expected for years now and terms have have been small pockets of discipline but no Torsten Jeworrek, member of the board deteriorated. We must beware of being real improvement in terms of pricing, really of management, Munich Re: Despite the the boiled frog. The water is already pretty just a halt to the declines in limited spaces. overall soft market, there are still selected warm. markets and lines of business which look We have seen some markets this year Neil Strong, partner and head of global promising and where Munich Re is eager to where we have had to cut back the origination, Securis Investment Partners: take chances. However, for the upcoming 1 book substantially, including the Florida Clearly as always, making a bold statement January renewal, Munich Re does not expect specialists. But overall, pricing in Scor’s P&C with 75-90 days left of a predicted active an overall change in prices on average, but book has been more stable than the market, wind season would not be a clever stance. rather in selected regions or lines. declining only 0.5 percent on a year-to- If losses were to remain benign then we date basis through July. Looking forward, would again expect limited pricing pressure, Stephen Young, CEO of reinsurance, some regions or lines of business will see but managing expectations, there is not Sompo International: Overall, the market improved pricing, while competition shifts too much room to manoeuvre. There would will continue to be challenging as we and drives rates down in other regions or appear to be no shortage of in ows into have record levels of capitalisation and a lines. the ILS market, so managers will be keen to tremendous surplus of capacity for most deploy in the 1 January window. lines of business. However, results in some Charles Goldie, CEO of worldwide We also expect there to be further longer-tail lines have shown di culties specialty, PartnerRe: I expect a 1 January conversations about broadening of terms with companies re-underwriting or even renewal that looks very much like the and conditions. We pay particular focus to withdrawing entirely. renewal periods that we have seen over this and hold a rm stance on issues such as With respect to property cat treaties, the past several years. For business that cyber. unfortunately, we still see weakness in US has generated pro ts recently, renewals cat rates as signi cant insurance-linked will be competitive. Reinsurers will need to Luca Albertini, CEO of Leadenhall Capital securities (ILS) capacity continues to be demonstrate value to buyers either through Partners: The structure of the market allocated to this line of business, along longevity, commitment and value-adding is changing. Reinsurance buyers favour with the new North Atlantic hurricane and expertise or by cutting prices and o ering more stable, sustainable and relevant North American earthquake models that generous terms. Buyers will need to make relationships, and are not just chasing lower were not considered for mid-year renewals. tough decisions about balancing those two prices. For this reason, I believe that the Interestingly, we are seeing lower levels of categories of sellers. core of the 1 January renewals will follow a rate reductions for cat business in Europe disciplined approach by market leaders, as and increased cat rates in Asia due to the Brendan Barry, chief underwriting o cer, the relevance and creditworthiness of some large number of frequency losses from New Greenlight Re: I expect renewals to be non-core players weakens. Zealand, Australia, China and Japan. pretty early as buyers see that there is good value in the market and they will want to Stephan Ruo , CEO of Tokio Millennium Victor Peignet, P&C CEO, Scor: In some wrap things up as quickly as possible. If the markets and/or segments, business has hurricane market has been non-eventful CONTINUED ON PAGE 19
16 DAY 1: SUNDAY BIG QUESTION: MARKET CONDITIONS
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18 16 March 2015 BIG QUESTION: MARKET CONDITIONS
Re: The availability of capital is abundant by nationwide US buyers along with Florida- state. Reinsurance capacity favoured clients and so far, the results of most carriers speci c companies. This re-acceleration that have managed to avoid the issue either have proven to be relatively robust in was driven by the speci c combination of through high-quality claims management rst half of the year. What we are seeing aggressive brokers and ILS managers, which or risk selection, and this resulted in slightly is an acceptance of the mix of capital raised additional capital and have a desire to larger than expected rate reductions for 1,920 from reinsurers and “convergence capital” deploy that capacity. these clients. active users across becoming the new norm, where there are the market 100% simply pools of capital looking for a good Peignet: We did cut our Florida-specialist Kurt Karl, chief economist, Swiss Re: There speciality insurance match with pools of risk. The dynamics of book quite signi cantly in 2017 in response have not been any major events in Florida the market will not change dramatically to Florida-speci c issues. Much of the for quite a few years, so I think this is more classes covered unless capital positions are heavily impacted decline was speci c to model change, Florida-speci c. Incidentally, all pricing for or nancials take a turn for the worse. but the supply of capital continued cat risk has become much more regionally Over 25% to put pressure on rates. How much speci c in the last decade. of Lloyd’s syndicates Amer Ahmed, CEO of Allianz Re: We of the model change was driven by are using RuleBook do not foresee a major change in the commercial considerations versus scienti c The US casualty treaty market has reinsurance market, as there is still plenty considerations? showed signs of uneven rming in some of capacity available and consequently The tendency for the cheapest model areas during 2017. Was this a false dawn continuing pricing pressure. In some areas, to win, and for everyone to appear to be or a sign of things to come? we have seen some resistance to further a better underwriter than average, ought 2,200 price weakening over the last several to concern all investors and underwriters Strong: Very much the sign of things to brokers access months. We would expect things to remain in our sector. When commercial concerns come. outweigh science, the seeds are planted for RuleBook platforms pretty at, absent some major e ect. another cycle. There will be instances where Jeworrek: We would have thought that James Few, global managing director the ability to invest in the resources needed this is a clear signal (again with regional of reinsurance, MS Amlin: The results to develop your own views of models and di erences in emphasis) of the attening being reported are re ecting a di cult your own infrastructure to dynamically that was to be expected. combination of circumstances and we manage your portfolios will make the (big) are starting to see management actions di erence. Young: For the last 10 years, the US in terms of cutting back on income and, casualty market has shown an ability in some cases, withdrawal of products. At Barry: With Citizens reducing its purchasing, to price accounts and di erentiate loss the same time, buyers are consolidating there has been a change in the supply leaders versus clean programmes. This is 10 reinsurance relationships with larger multi- and demand situation in Florida. Together an encouraging sign which we expect will deployed in over line, nancially secure, long-term partners with an increase in Florida companies continue. More speci cally, for quota share 10 countries where price is only one consideration. accessing capacity via the bond market, treaties, there seems to be a sense that 35 Capital remains strong in the sector, this has created increased impetus for rate percent is the high-water mark for ceding mitigating market corrections, but it’s reductions in the state. Even with this reality commissions, so there is some optimism on hard to see a business case for further rate Florida still o ers better margin that most that front. Excess-of-loss (XoL) rates are also reductions. cat exposure. What could be interesting is somewhat responsive to loss experience. that Florida has been subsidising the overall There was a re-acceleration of property catastrophe market for quite a long time. Peignet: I believe there are a few factors at cat rate reductions in Florida at 1 June. When that fat gets squeezed out of the play here. First, there’s nowhere to hide in Was this down to Florida-speci c factors portfolio, how will some justify pricing in auto liability and workers’ compensation, or could we see something similar more some territories? where the market has seen adverse prior- generally in the cat market at 1 January? year development and recent accident years Ruo : It was not a re-acceleration of are performing poorly. Jeworrek: Within the recent history of property cat rate reductions; it was Second, the market has started to see hints renewal dates, one could observe a slowing an unful lled expectation of rates not in some liability and umbrella portfolios of price decreases. The current Florida decreasing further. The Florida market is suggesting that recent accident years aren’t renewal is seemingly not in line with this signi cant. After all, it is the biggest single performing quite as well as prior accident trend. The re-acceleration of property cat market in the world. However, these years at the same point in time. THE ULTIMATE INSURANCE BEAST cat rate reductions in Florida is probably rate reductions are not a precursor for Third, actuaries have had a look at the result of state-speci c factors, as the similar happenings in the wider cat market. historical performance in US casualty, and it RuleBook is a market leading pricing, underwriting and distribution tool. Our latest generation, multi award-winning platform is now market’s view on the history of hurricane Di erent regions are looked at in di erent has become clear that ceding commissions used by over 25% of Lloyd’s syndicates, with clients across three continents. Trusted by some of the leading names in the market, activity and the recent model change by ways – as we’ve seen with the recent in the mid-30s for quota share business RuleBook is helping our clients become more agile in pricing, giving better control of the underwriting process and allowing them to RMS (RiskLink) might have had some impact. Australian renewals, which were impacted just aren’t sustainable. While the occasional distribute products fast and wider than ever before. by Cyclone Debbie. treaty placement is completed at ceding Young: Rate reductions at 1 June weren’t commissions approaching 40 percent, they purely in Florida as overall mid-year US Few: The Florida renewals in June were also are not the standard. renewals certainly saw more signi cant a ected by concerns over the assignment of www.moorestephensconsulting.com decreases than other regions of the world. bene ts problem that has been causing an Goldie: You’d have to question the sanity Aggressive pricing was put into the market upward trend in losses in certain parts of the Continued on page 21
16DAY March 1: SUNDAY 2015 19 The New Breed in Risk Management and Capital Solutions BIG QUESTION: MARKET CONDITIONS
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of anyone who is broadly bullish on US Strong: Without the necessary track casualty, based on where things stand today. record, product o ering, infrastructure CONTRIBUTORS Firstly, we have already seen some insurers and origination capabilities, unfortunately forced to take action to address their loss there is capital that can only access risk reserves – even for very recent underwriting and exposures by taking on quota share years. While there are some signs of uneven investments of portfolios, despite the Luca Albertini, CEO of rming, there is little evidence of any broad obvious reason of the cedant simply Leadenhall Capital Partners improvement in rates, terms and conditions. managing their net through the cycle. It is The trends in the US casualty space over a limited number of reinsurers that do this, the past 10+ years have been surprisingly but it is harmful to the wider marketplace. Amer Ahmed, CEO of favourable – but there are concerns that this Compare this to quota shares of cat- Allianz Re could change. exposed insurance portfolios. We have noted some shift in capacity from the XoL Barry: In US casualty over the last 18 market to provide quota share capacity. months, reinsurers have started to draw This is sensible in situations where the Brendan Barry, chief a line in the sand, particularly over quota catastrophe component of reinsurance risk underwriting o cer, shares. This means there has been a halt is better priced (after adjusting for attritional Greenlight Re to the decline overall, and small areas losses) than the brokered reinsurance XoL of rming. However, there has been a catastrophe market. softening on the insurance side and casualty James Few, global loss ratios are continuing to increase so net Peignet: The key for us is the long-term managing director of a worsening position for casualty quota partnership across the board as opposed to reinsurance, MS Amlin share. There has been a general decline “spot” arbitrage deals on given portfolios to in the frequency of casualty claims for a cope with situations that may not last. We number of years and the market is waiting follow the same approach with loss portfolio to see if there is a turn back against this but transfers and adverse development covers, Charles Goldie, CEO even at current levels, margins are thin to which an increasing number of insurers are of worldwide specialty, non-existent. using for similar reasons: to manage their PartnerRe balance sheet and capital utilisation and to Ruo : US casualty reinsurance market reduce P&L volatility. proportional quota share placements have Torsten Jeworrek, not seen further increases of commissions, Barry: Unfortunately, yes. We have seen a member of the board of so there was no false dawn. The underlying number of deals that are clearly about big, management, Munich Re facts are that primary rates have continued top line growth with little or no margin in to decrease and loss activity is picking the business. A big cat event will not be up. Overall, the market is not improving. enough to change the market but it may However, with reinsurance ceding highlight that there is no meaningful pro t commissions having stopped creeping up, in other parts of the market. Until then, the Kurt Karl, chief economist, there is hope that markets are coming to quota share market will be alive and unwell, Swiss Re reason. driving top line growth for some time to come. Few: Some areas of US casualty are responding to poor results, notably in US Albertini: Leadenhall has never invested in Victor Peignet, P&C CEO, auto such as trucking risks and also parts quota share reinsurance treaties as we do Scor of the construction market. Opportunities not see them as being the best structure exist but require specialist knowledge and the best risk and return for capital as exposures are complex, especially markets investors. We will not be changing when set against a low investment return our approach in 2018, but others may fall Stephan Ruo , CEO of Tokio environment. into the temptation given their available Millennium Re: capacity. Karl: The market will take some time to fully rm, but with some segments having price Few: Proportional reinsurance treaties Neil Strong, partner and increases and some companies needing to can still be attractive even in this market head of global origination, increase reserves, it is clearly the beginning but given the low margins available in Securis Investment Partners of the end of the soft market. this prolonged soft period and upwards trends in commissions in recent renewals, Do you think that reinsurers will continue reinsurers are taking a harder look at each Stephen Young, CEO to support new quota share reinsurance treaty. Lower performing contracts are of reinsurance, Sompo treaties that look suspiciously like likely to nd renewals challenging with an International attempts to arbitrage the market in increased emphasis on reasonable terms for 2018? both buyer and seller.
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R&Q-newtemplate.indd 3 08/09/2017 17:26 PROFILE
Breaking uncharted territory The Insurance Insider talks to Munich Re board member for reinsurance Torsten Jeworrek about nding fresh opportunities in a sluggish market
n a reinsurance market which seems to lederhosen” culture in Munich. Ibe largely stagnant, Munich Re’s Torsten Digital disruption has the Jeworrek, of Oschersleben, Germany, Jeworrek stresses the importance of “potential to change the way has a background in academia. He looking ahead. insurance works. Particularly studied mathematics at the University of The agenda for the Monte Carlo Rendez- Magdeburg, and cites obtaining his PhD Vous hasn’t changed much over the past ve in reinsurance, the use of as one of his proudest moments. In fact, years, and this year will be little di erent. data analytics and new data the executive says, had he not taken up “I expect the discussions about the sources could have a big a career in reinsurance, he would have pro tability of our business will continue,” impact on our underwriting probably sought to become a professor of says the Munich Re board member for ” mathematics. reinsurance. One of the hardest lessons during his “But I feel it is much more important to academic years was learning how to write a discuss new business opportunities, how good essay in German, he says. digitalisation will transform our industry, But despite all of his professional how we manage new risks – like cyber achievements, he is most proud of his family, risks – and how to expand insurability and speci cally taking the opportunity to while at the same time limiting possible move from East Germany to West Germany accumulation risks.” following the fall of the Berlin Wall in 1989. There is no doubt the reinsurance industry Throughout his reinsurance career, has to innovate to remain relevant to clients Jeworrek has seen numerous major losses and end customers, but the market also and market cycles, and believes that in needs to ask the higher-level questions order to push forward this time round, the about where to go next, according to the industry must embrace data, technology executive. and analytics. “The question of how to close the Asked where he would like to see the insurance gap, for instance for nat cat risks, reinsurance industry by the time he retires, remains highly topical,” Jeworrek says. he says: “The industry will be agile. Digital “What can our industry do to build solutions and data analytics will be resilience and foster prosperity, part of daily business.” especially in emerging countries? He continues: “Digital What role can public-private disruption has the partnerships play?” potential to change the Jeworrek is in his third decade way insurance works. of employment at German This will of course also reinsurance giant Munich Re. have an in uence on He rst joined the company in reinsurance. That’s 1990 as an underwriter in the why we are looking operational risks division. to work with Eleven years and several CONTINUED management positions ON PAGE 25 later, he was made head of the Netherlands, Nordic countries, UK and Ireland, before being appointed to his current role on the management board in 2003. The executive tells The Insurance Insider how he enjoys golf and sailing in his free time, that Lake Maggiore in Italy is his holiday destination of choice and how he loves the “laptop and
DAY 1: SUNDAY 23 PROFILE
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24 16 March 2015 PROFILE
clients to navigate the changing world of risk ability to develop a solution that truly meets business,” he explains. and nd opportunities to grow in this space.” the client’s need.” “This is more di cult with standard bread- This could mean introducing them to Jeworrek is a strong believer in Asian and-butter business. For specialty business new technologies or start-ups as potential emerging markets as a driver for insurance we have a leading edge with our in-depth strategic partners, or it may mean growth in the medium term. know-how.” co-developing new products with clients to For example, he highlights predictions So what are Jeworrek’s wider thoughts on meet an emerging need, he explains. that China is imminently set to become the how the reinsurance market will develop? Munich Re’s Digital Partners unit has been world’s second-largest primary insurance The executive ags some concerns about one of the most active investors in the market behind the USA. the level of reserving in the reinsurance InsurTech space. But despite continuously strong growth, market, particularly in casualty. He says the It has partnered with some of the bigger the Chinese insurance market is still need to strengthen reserve bu ers among names in the InsurTech market, including massively underserved. casualty reinsurers could even have the Bought By Many, Slice Labs and Trov, but potential to turn the market. also rms which target underserved niches Under-reserving on the “We saw several companies strengthen of the economy, such as real-time resolution “casualty side could be a their casualty reserves recently,” he says. ight interruption insurance provider Blink trigger for broader rate “Indeed, we agree that under-reserving Innovation, and Wrisk, which provides on the casualty side could be a trigger insurance direct through smartphones. increases in the market. for broader rate increases in the market. “Particularly in reinsurance, the use of data Potentially this could also Potentially this could also have a more analytics and new data sources could have have a more drastic impact drastic impact on the aforementioned a big impact on our underwriting,” Jeworrek on the aforementioned market turn than the impact of a single cat claims. event,” he says. The e ective use of data analytics by market turn than the impact The executive believes consolidation will reinsurers is becoming imperative. Clients of a single cat event also continue to largely restrict itself to the are increasingly searching for sophisticated ” smaller carriers. Only a few acquisitions solutions for complex needs to boost their “Its low penetration and density, coupled among the smaller reinsurers have taken competitive position, Jeworrek explains. with increasing a uence within the place in the last few years, and this did not “This is where large reinsurers that deliver population, point to enormous growth change in the last 12 months, he notes, value beyond pure capacity have a leading opportunities,” Jeworrek says. saying he expects this status quo to prevail. edge over their competitors. Clients expect Moving from emerging markets to “In the current market environment, I from their reinsurers that they support them emerging risks, the executive highlights suppose many large reinsurers are striving to in staying ahead of the pack, be it with cyber risk as a big opportunity for the expand and are developing new capabilities capital management solutions, data analytics reinsurance market. internally and looking at complementary or digital services.” Munich Re has already shown it has an acquisition targets outside the reinsurance One of the main complaints about today’s appetite for this risk – last year, it announced sector,” the executive explains. market is that there is little opportunity for a collaboration with London market carrier “This is also Munich Re’s M&A strategy, growth. The market remains saturated with and data breach pioneer Beazley that allows which we are actively pursuing by investing capital, with limited scope to put it to good the insurer to put down a $100mn line for in specialty insurance.” use. cyber insurance. It is for this reason Munich Re is looking But as Jeworrek explains, great further a eld for growth opportunities. It opportunities can often come hand in hand Curriculum vitae was one of the rst reinsurers to apply for a with great challenges. branch licence in India – its Mumbai o ce “We see growth potential in cyber risk Education: University of Magdeburg, opened on 31 January this year – although due to legislation and internal governance mathematics the rm’s business commitment to the requirements, and to a rising awareness of Previous experience: Assistant country stretches back as far as the 1950s. claims development,” he says. lecturer, mathematics, University of “The dynamically developing insurance “On the other hand, there is large Magdeburg market on the Indian subcontinent accumulation potential, and you need a 1990: Underwriter, operational continues to present new challenges and thorough understanding of the technology division, re/treaty, Munich Re opportunities,” Jeworrek explains. “A look as well as of the industry using the 1997: Various management positions at the country’s growing industries and technology. That’s why we partner with in the Munich Re operational expanding middle classes reveals a real need external technology companies to bring in division, for re/treaty and nancial for high-quality risk solutions.” the know-how we do not have in-house.” reinsurance/retrocession The move to open a Mumbai o ce has Munich Re has sought to write more 2003: Appointed to the board brought Munich Re closer to the market specialty business over the past year, as part of management of Munich Re. and its clients, as well as enabling it to o er of diversi cation e orts in a sluggish market. Responsible for reinsurance more value-added and tailored services, he But there is no optimal ratio of specialty to development, corporate underwriting, continues. traditional P&C business, Jeworrek says. claims, accounting, information “In the current market environment, there “I do not think there is a general rule for an technology, and controlling and is abundant capacity. The real value-add of a optimal ratio. We deploy our capacity where central reserving for reinsurance reinsurer in the market is its know-how and we have a fair chance of getting pro table
16DAY March 1: SUNDAY 2015 25 LGT advert 2017.indd 1 29/08/2017 15:46 Q&A
View from the top Willis Re’s CEO-in-waiting James Kent explains how the broker will further its use of analytics and consulting to its advantage as it enters its next phase of leadership You are set to take over from John opportunities in the emerging markets consulting, together with market-leading Cavanagh as CEO of Willis Re from the across insurers’ entire risk management technology and analytics, to provide deeper end of the year. How will Willis Re change spectrum is exciting. insight and better outcomes for our clients. under your leadership? It’s a very tough act to follow in terms What will Willis Re look like ve years We have seen a record Q2 of insurance- of both John’s track record and industry from now? linked securities (ILS) issuance this personality. John has been our CEO through What I would hope is that clients of Willis year. Does this threaten the traditional a transformational time for Willis Re – not Re are able to bene t even more from the reinsurance model? least the merger with Towers Watson – while, advisory side of our business. Where the A lot of these reinsurers are working side at the same time, overseeing good organic broker-client relationship works particularly by side with ILS capital and many of the growth in all our business units. well is where, as a broker, you’re almost an issuances have met increased demand for John is leaving the business in healthy extension of that client’s risk and nancial cat limit. This represents a healthy alternative shape, but that doesn’t mean you don’t management team. for buyers. So is it threatening or is it continue to evolve the business. You strive The model that we built before the transforming the traditional model? What to make changes to re ect external factors merger with Towers Watson integrated the shouldn’t be underestimated is that while it – rather than any internal factors – which is analytics into the broking team so that it continues to evolve and grow, the licences, a good reason for change, because you are wasn’t separately branded and provided rating and leverage around a traditional changing to adapt to the market and your clients with a seamless o ering. It forced our balance sheet the traditional (re)insurer can clients’ needs. brokers to think like actuaries and vice versa. bring are still very powerful. I believe the The biggest factor in terms of our clients’ Five years ahead I hope to see a continued (re)insurers that work with the ILS capital needs is the impact of the merger with evolution of that model, so right across the side-by-side are probably the ones that will Towers Watson, and the addition of the company people are comfortable with the emerge as the winners. front-end underwriting tools and services to analytics side of our business, and beyond augment our existing capabilities, therefore that the advisory and consulting to support MGAs are seen by some as another enhancing the consulting and advisory work clients in all aspects of managing risk and disruptor – how will the rise in the we do for our clients. capital. number of these companies change the I honestly see the Willis Re o ering in shape of the (re)insurance market? The market is going through a combination with the broader Willis Towers I happen to believe that MGAs which are challenging period at the moment. How Watson business as a real game changer and taking risk themselves – whether through do you future-proof Willis Re? a compelling advantage for us. a captive or other means – is a really I think the fact that the reinsurance brokers important part of the partnership. There have been growing though the soft market How do you ensure all the units across are a litany of failed MGAs where the fee really shows there is a broader array of Willis Towers Watson come together to income seemed to be the bigger driver clients, beyond traditional P&C insurers, provide that seamless client o ering? than the underwriting, and that can’t ever which see reinsurance as a way to transfer The ability to work with our colleagues be forgotten. And as a broker we are pretty risk. So, we are growing by geography and across the others parts of Willis Towers selective with the MGAs we choose to work by product. Watson to enhance how we can support with. We don’t do any good by putting If we only held the number of clients we clients is very compelling, and actually quite inferior business into the market. have today then our business would start an exciting prospect when you think about But I think for traditional carriers, additional to go backwards, because there’s natural the broad areas we can now advise clients fee income will eventually be a bigger part attrition in the business due to rates, M&A, on. of the business going forward. You also client retention etc. So we need to nd new There is a healthy engagement and cannot underestimate the ability of these areas to grow and that can come from your willingness to work together, we talk about MGAs to attract talent. The opportunity to existing client base, new classes of business collaboration a lot and I do think it is a generate ownership in a business is a big or emerging markets. di erentiator. It is an attitude which has attraction there. For example, when I look at our regional been cultivated by the previous leadership, and mutual client base, most of those including John, and if there is a single most companies are growing their market share. important thing that I have to protect, it is They are very reinsurance-dependant, and the culture of collaboration and willingness as a consequence that part of our book is to work together, for the good of the providing some growth. company and the client. We are also working with our clients on a When this works well, our combined broader array of classes of business. Cyber, capabilities bring knowledge and insight mortgage, life – these are growing classes across the entire risk and capital value chain, James Kent of business where we are supporting drawing on the sector expertise of our teams Deputy CEO, Willis Re our clients. And the development of in reinsurance, securities and insurance
DAY 1: SUNDAY 27
Q&A
Going for growth
How does TigerRisk keep growing despite so challenging and because clients are a higher cost of capital instead of passing the soft market? struggling to gure out how they can drive them on to a jurisdiction with e cient We are witnessing very substantial growth value against the backdrop of third-party regulatory, corporate and tax structures or in our business against the backdrop of the capital, disruptive technology, a sustained utilising an investment strategy that may soft market. Frankly, the way we’re doing low interest rate environment, di cult ultimately drive a lower cost of capital? it is by really focusing on our integrated pricing, increasing volatility and the need Or why shouldn’t the insurer of the future strategy to be the leading risk, capital for scale. generate more fee income, produce better and strategic adviser in the industry. Our They are also looking for value-added, risk-adjusted returns and increase the strategy is fundamentally di erent than that innovative and creative ideas. And velocity of its capital? Eventually all risk is of our competitors. they’re no longer as interested in hiring going to nd or gravitate to the lowest cost So we are continuing to come up with a reinsurance intermediary just because investors and most e cient structures. very innovative ideas – some of which will that institution gives them business on the become evident soon – that are derived primary side – they’re demanding more. What do you see happening in the M&A from all the domain insight, market environment going forward? intelligence and industry knowledge that Growing is fun and it We’re going to continue to see a steady the organisation collectively possesses. “ ow of M&A activity. There are lots of This includes a big investment of time and also requires us to be in an small to mid-sized entities in the market money into new and disruptive technology. aggressive hiring mode to now and I believe that we will see further We are leveraging all of the expertise nd really top talent that large transactions occur as time goes on. within the rm. As a result, we are achieving want to do something more It’s impossible not to conclude that scale a lot of growth in our capital markets and is important in this environment. And the strategic advisory business, our adverse entrepreneurial and want insurance services sector will continue to development and loss portfolio transfer to get away from larger be hot. business, and in our technology business. bureaucratic organisations Overall, the insurance industry continues We are using the innovative ideas and ” to be relatively fragmented and the strategic advice we deliver to also make sure disruptive forces of both new capital, we are picking up new recurring reinsurance They are demanding that their business new technology and di cult operating brokerage business as well. partners be more innovative and creative in conditions will continue to drive the It’s really hitting all the cylinders but it’s the ideas that they come up with – and that consolidation trend. not a strategy that is blindly focused on they add more value to their business. But these things have a long gestation reinsurance. It’s a strategy that’s broadly What we’re hearing more and more from period, there are plenty of obstacles to focused on really trying to be the leading clients is that trend for the big three to getting them complete. I have worked on risk, capital and strategic adviser in the leverage their inward business for outward a lot more deals that didn’t get done than market and to anticipate new technology reinsurance brokerage has become less those that did. and what the insurer of the future is likely to and less acceptable and those brokers are So our view is that we will see more look like. getting more pushback as a result. deals announced this year and probably Growing is fun and it also requires us to be In comparison, we try to leverage ideas an acceleration next year as transactions in an aggressive hiring mode to nd really and solutions that help people in the being thought about today make it to the top talent that want to do something more current environment and it’s resonating. announcement phase. entrepreneurial and want to get away from It’s resonating with carriers that are getting larger bureaucratic organisations. We are more frustrated with the old approach looking for people who do not want to be a and more demanding about value-added cog in the wheel but rather want to help us solutions, services and ideas. So we hope continue to build something great. that we’re in the right spot. We see business So you will see us continue to make coming our way as a result. some announcements on the hiring front through the rest of this year. Those hires What does TigerRisk expect the insurer of are designed to support the growth and the future will look like? accelerate it going forward. It’s exciting. We think the insurer of the future will have more of an “originate to distribute model” Do you think large brokers are using for risk. That would see carriers originate, untoward leverage to demand that their underwrite and price risk before passing clients use their reinsurance brokerage it on to the cheapest pools of capital they arms? can nd. And they will use increasingly Increasingly, the market participants sophisticated and advanced technology to we speak to are looking for ways to assist with this. Tony Ursano disintermediate the traditional value chain. Why should the insurer of the future hold President, TigerRisk That’s because the market conditions are 30-year legacy liabilities when they have
DAY 1: SUNDAY 29 RESPONSIVE AD_MONTECARLO _AD_SERIES_HQPRINT.pdf 1 8/23/17 4:19 PM
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ILS manager LGT welcomes London move
We understand you have been able to catastrophe event, there are clear Obviously, our clients seek positive grow your asset base over the last years – indications that investors would increase returns in the long run. We and other ILS how has your client base developed? their allocation immediately to bene t from managers cannot manage a negative Our investor base mainly consists of potential rate increases. As such, we see that yielding portfolio, whereby the expected institutional investors such as pension ILS investors are content with the current loss exceeds the return expectations after schemes and sovereign wealth funds, but market environment, but prepared to move cost, and ILS investors demand transparency we have traditionally always maintained a as opportunities arise. on this, unlike investors in the traditional smaller o ering geared towards wholesale reinsurer sector. As such, we believe that distributors and family o ces. During the The UK government is currently working ILS managers are likely to be the most initial growth phase we saw strong interest on a framework to bring ILS business to disciplined underwriters when it comes to from European investors: the topic of the UK – what is your view on this? cycle management. investing in insurance-linked strategies was Being based in Europe, it has always been very well received, especially in countries a bit of a disappointment to see “o shore” Lastly, a returning topic at this year’s like Switzerland and the UK where the jurisdictions such as Bermuda and Guernsey conference is once again cyber risk – insurance sector is an important contributor attracting captives and cat bond or special what is your stance on this peril? to the economy. purpose insurance company (SPI) structures. When investing in insurance-linked Yet, over the past few years we have been From a distance, it looks as if this is owed strategies, institutional investors are looking able to broaden our investor base and have to the favourable tax environment, which is for the low correlation of ILS returns. Payouts seen new regions opening up to the topic: certainly playing a role, albeit a small one. under cyber contracts may trigger a strong this year, we have won new mandates from The real driver is the open-minded correlation to nancial market movements, investors in Korea and Japan. Also, our and e cient regulatory body in these especially when trading systems or entire US o ering, which was launched in early jurisdictions, especially in Bermuda: stock exchanges are exposed to an attack. 2015, continues to attract investors looking adopting a simpli ed regulatory framework While investors understand that there for our more conservative and diversi ed for collateralised transactions was a may also be a correlation in the aftermath investment approach. sensible and smart move. After all, the main of a natural catastrophe event such as Overall, ILS has gained considerable focus of the regulator is consumer and a strong earthquake in California, the momentum; the asset class is no longer “system” protection. In a fully collateralised uncertainty around the manifestation of an “esoteric” niche but has reached the reinsurance contract, credit and default risk a cyber-attack makes the assessment and status of a recognised diversi er for many is mitigated to a very large degree – in fact, risk management for this line of business institutional investors. such transactions should be favoured by the di cult, if not impossible. regulator over traditional “promise to pay” Lastly, investors understand that certain Rates have softened considerably over reinsurance as these deals serve to mitigate elements around a cyber-attack are already the last 24 months, which means that ILS the “systematic risk” to the sector. part of their allocation – if, for instance, the returns have come down as well. What However, setting up a SPI in the EU or attack is aimed at a hydroelectric plant and is the response of your investors to this Switzerland is still not possible or e cient results in a ood, the water damage may trend? today; insurance regulators impose be picked up through standard property First and foremost, institutional investors signi cant capital and sta ng requirements. contracts. In summary, while we clearly see fully understand that today’s returns in The move of the UK government to adopt the need for such protection, we believe insurance-linked strategies should not be a simpli ed regulatory framework in order that the collateralised market is not yet compared with historic returns, as collateral to allow for such collateralised structures ready to transact such back-up covers in any returns are signi cantly lower today and the to be set up in the UK is timely. We are a meaningful size, while traditional markets novelty premium no longer applies, given strong supporter of this development and will likely see some diversi cation bene ts that ILS has gained traction and developed hope that this enables further growth of the from such risks. into a recognised asset class. sector. Further, it has become increasingly di cult to nd attractive investment opportunities So, what is your outlook on pricing for in the traditional nancial market. the upcoming renewal round – and is Our investor base appreciates the low there a “walk away” price level for you correlation of ILS returns with other nancial and your investors? market instruments, and this is taken into Clearly, pricing for the upcoming renewal account when comparing ILS returns with round depends on event activity, and other investment opportunities. As a result, especially the assessment of Hurricane the majority of our investor base is currently Harvey, Hurricane Irma and other events will investing in ILS with a smaller allocation be driving the discussions. We – on behalf simply to optimise the diversi cation of of our clients – compare the expected Michael Stahel their portfolio. premium returns with the expected loss Partner/portfolio manager, However, if there is additional demand levels of each transaction and then on a LGT ILS Partners for reinsurance protection after a large portfolio level.
DAY 1: SUNDAY 31 EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION
The Insurance Insider’s 2016 P&C executive pay league
he collective remuneration of the Top 10 earners T50 highest paid executives in the Rank Name Company Position 2016 pay P&C (re)insurance industry increased by John Haley Willis Towers Watson CEO $28,846,121 5.6 percent to $479.0mn in 2016, The Insurance Insider’s executive pay league has shown. 1 Our annual survey includes more than Evan G Greenberg Chubb Chairman, president and CEO $24,419,486 200 executives across 35 publicly listed P&C (re)insurance companies and ranks them 2 in order of total compensation for the year, Jay S Fishman Travelers Former chairman & CEO $17,781,842 including base salary, cash bonuses, stock and option awards, as well as other bene ts such as pensions. 3 The 5.6 percent growth rate follows an Daniel S Glaser Marsh & McLennan President & CEO $15,749,940 11.8 percent decline to $453.4mn in 2015, Companies and a modest uplift of 1.8 percent in 2014 4 for the top 50 highest paid executives, using Dominic Casserley Willis Towers Watson Former president & deputy CEO; $15,430,339 ve-year average exchange rates. former legacy Willis Group CEO In terms of average CEO compensation, 5 the 2016 result stood at $7.0mn, just 1.2 percent higher year-on-year. Greg Case Aon CEO $15,234,773 But the range of total earnings among the top 50 was slightly lower last year, 6 decreasing by 3.3 percent to $23.9mn from Thomas J Wilson Allstate Chairman, president and CEO $13,813,515 2015, while the spread between the top 10 Top 50 pay rises... shrank by 4.8 percent to $16.4mn. 7520 +1.8% By means of comparison, the median -11.8% 510 CEO pay at S&P 500 companies was just +8.1% Stephen McGill Aon Former CEO, Risk Solutions $12,843,025 500 under $12.2mn in 2016, a rise of 6.7 490 percent, according to a study performed by 8 480 +5.6% Institutional Shareholder Services Analytics. Michael McGavick XL Group CEO $12,653,175 The gure stems from an analysis 470 performed on 270 companies within the 9460 index which had reported their nancial 450 results by 10 April 2017. 440 William R Berkley WR Berkley Chairman of the board $12,436,950
Top 50 total compensation ($mn) compensation 50 total Top 430 The big 10 10420 2012 2013 2014 2015 2016 The pick-up in aggregate earnings was also Source: Company reports, The Insurance Insider Source: The Insurance Insider, company reports re ected in the remuneration of the top 10 highest paid executives in the industry, who received a total of $169.2mn – a decrease of Brokers prosperBrokers as prosper US specialty as US specialtyexecs take execs pay take cut pay cut 0.2 percent from the 2015 gure. This marks the third consecutive yearly 14 2015 +9.8% 2016 +3.4% decrease in the top 10’s aggregate earnings, 12 $12.2mn $11.5mn after the 2015 top 10 received 11.2 percent 10 +8.8% less than the corresponding group the $9.3mn 8 +5.3% previous year. -17.6% In the past ve years, the total 6 -14.7% $6.5mn remuneration for the 10 biggest earners has 4 $5.3mn decreased by 2.6 percent from $173.8mn to $4.2mn 2 -12.2% $169.2mn. Average CEO cpmesnation ($mn) CEO cpmesnation Average 0 $0.7mn Willis Towers Watson (WTW) CEO John US London US specialty Global Bermuda US large cap Brokers* Haley topped our executive pay league with nationwides carriers reinsurers a total remuneration of $28.9mn in 2016. *Excluding Aon Source: The Insurance Insider, company reports Haley received a base salary of $1.2mn, 2016 Bermuda CEO compensation
4.0 2015 DAY 1:3.7% SUNDAY 32 3.5 2016
3.0 2.7% Average: 2.4% 2.5 2.1% 2.0 2.1% 2.2% 1.5 1.4% 1.0 % of operating income income % of operating 0.5 0.0 Validus Axis Arch RenRe XL Catlin Aspen Source: The Insurance Insider, company reports
2016 Lloyd's CEO compensation 7 2015 2016 6 5.6% 5 4 Average: 2.9% 3 2.1% 2.2% 2 % of net income 1.2% 1 0 Hiscox Beazley Lancashire Novae Source: The Insurance Insider, company reports
2016 global reinsurer CEO compensation
1.8 2015 1.6 2016 1.4 1.3% 1.2 1.0 0.9% 0.8 0.6 Average: 0.5% % of net income % of net income 0.4 0.2 0.1% 0.1% 0.2% 0.0 Munich Re Swiss Re Hannover Re Everest Re Scor Source: The Insurance Insider, company reports
2016 US specialty CEO compensation 7 2015 2016 6.2% 6 5 4.3% 4 3.6% Average: 3.0% 3.3% 3 2.4% 2.8% 2 1.2% % of operating income % of operating 1 0.6% 0 Markel AmTrust WR Berkley The Hanover Argo AFG* RLI Navigators
*Represents salary for both co-CEOs Source: The Insurance Insider, company reports EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION
the highest among his competitors and 17.3 Top 50 highest paid P&C (re)insurance executives in 2016 percent more than that paid to Dominic Rank Name Company Position 2016 pay Rank change Casserley, the former WTW president and 1 John Haley Willis Towers Watson CEO $28,846,121 new entry deputy CEO. 2 Evan G Greenberg Chubb Chairman, president and CEO $24,419,486 +0 Nevertheless, the bulk of Haley’s 2016 3 Jay S Fishman Travelers Former chairman and CEO $17,781,842 +0 remuneration was in stock awards, which amounted to $24.6mn. 4 Daniel S Glaser Marsh & McLennan Companies President and CEO $15,749,940 +1 5 Dominic Casserley Willis Towers Watson Former president and deputy CEO; $15,430,339 +10 Meanwhile, Chubb CEO Evan Greenberg former legacy Willis Group CEO held onto the number two spot for the 6 Greg Case Aon CEO $15,234,773 -5 second consecutive year with a total pay 7 Thomas Wilson Allstate Chairman, president and CEO $13,813,515 +1 package of $24.4mn – up 19.8 percent year- 8 Stephen McGill Aon CEO, Risk Solutions $12,843,025 +6 on-year. 9 Michael McGavick XL Group CEO $12,653,175 +0 Like Haley, the uplift was mostly fuelled by a 45.2 percent increase in stock awards to 10 William R Berkley WR Berkley Chairman $12,436,950 -6 $12.9mn thanks to the Ace-Chubb merger, 11 Dinos Iordanou Arch Chairman and CEO $12,211,136 +1 which nalised at the beginning of last year. 12 Thomas Motamed CNA Retiring CEO $11,912,007 -1 In third place stood the late Jay Fishman, 13 Alan Schnitzer Travelers CEO $11,558,119 +21 previously chairman and chief executive of 14 David Herzog AIG Former EVP and CFO $10,738,460 +23 Travelers, who received total remuneration 15 Robert Berkley, Jr WR Berkley President and CEO $10,363,289 +4 of $17.8mn. 16 Brian MacLean Travelers President and COO $10,143,253 +1 Marsh & McLennan Companies CEO Daniel 17 Christopher Swift The Hartford Chairman and CEO $10,079,121 -4 Glaser was the fourth highest earner with 18 John Keogh Chubb Executive vice chairman and COO $9,971,013 +11 $15.7mn, which was relatively at year-on- 19 Denis Kessler Scor CEO $9,806,413 +16 year. 20 Craig Lindner AFG Co-CEO and co-president $9,752,845 +5 But rival broker WTW made its way into 21 Carl Lindner III AFG Co-CEO and co-president $9,736,384 +5 the top 10 again via Casserley, who climbed 22 Peter Hancock AIG Former CEO $9,576,535 -12 nine places to fth position with a total pay 23 Peter Za no Marsh & McLennan Companies Chairman of Risk and Insurance $9,109,372 +0 package of $15.4mn. Services and CEO of Marsh Casserley left the rm at the end of 2016, 24 Stephen Catlin XL Group Former executive deputy chairman $9,041,432 +0 and as revealed by this publication, has 25 Dom Addesso Everest Re President and CEO $8,827,677 -5 since taken up a role at private equity rm 26 Christa Davies Aon CFO $8,712,408 -20 Warburg Pincus. 27 Albert Benchimol Axis CEO, president and director $8,538,281 -11 Aon was another broker to make a 28 John J Lupica Chubb Vice chairman, chairman, insurance – $7,792,010 +13 reappearance in the top 10, after its CEO North America Greg Case topped the prior-year’s ranking 29 Joseph Zubretsky The Hanover President and CEO $7,598,515 new entry with a total remuneration of $29.7mn. 30 Kevin O’Donnell RenaissanceRe President and CEO $7,550,208 -8 In 2016, Case was the sixth best paid 31 William Heyman Travelers Vice chairman and CIO $6,869,806 +2 executive in the industry with a total of 32 Douglas Elliot The Hartford President $6,804,302 -2 $15.2mn, as his stock awards for the year 33 Christian Mumenthaler Swiss Re Group CEO $6,615,542 new entry reduced to $11.1mn from $25.5mn a year 34 Jay Benet Travelers Vice chairman and CFO $6,600,361 +2 before. 35 Julio Portalatin Marsh & McLennan Companies President and CEO of Mercer $6,387,427 +4 But his now-departed peer Stephen McGill, 36 Philip V Bancroft Chubb CFO $6,172,690 +16 formerly CEO of Aon’s Risk Solutions unit, 37 Kevin Hogan AIG EVP $6,156,713 -16 Continued on page 34 38 Marc Grandisson Arch President and COO $6,051,352 +17 39 Paul Krump Chubb President, North America commercial $6,040,645 new entry Top 50 pay rises… and personal insurance Top 50 pay rises... 40 Bronek Masojada* Hiscox CEO $5,979,287 +10 41 J Patrick Gallagher, Jr AJ Gallagher CEO $5,739,167 +4 520 +1.8% -11.8% 510 +8.1% 42 Douglas Dachille AIG EVP and CIO $5,695,787 new entry 500 43 Paul Brand XL Group EVP, CEO of insurance operations $5,622,995 +13 490 44 Andrew Horton* Beazley CEO $5,373,335 -3 480 +5.6% 45 Matthew Winter Allstate President, Allstate Personal Lines $5,313,575 -3 470 46 Christopher O’Kane Aspen CEO $5,302,873 -3 460 47 Jonathan D Kantor CNA EVP, general counsel and secretary $5,183,019 +10 450 48 Nikolaus von Bomhard Munich Re CEO $4,974,906 -2 440 49 Peter J Beshar Marsh & McLennan Companies EVP and general counsel $4,937,656 +9
Top 50 total compensation ($mn) compensation 50 total Top 430 50 Barry D Zyskind AmTrust President and CEO $4,902,193 -43 420 Total $478,951,275 +5.6% 2012 2013 2014 2015 2016 *Calculated at 5-year average exchange rate Source: The Insurance Insider, company reports Source: Company reports, The Insurance Insider
Brokers prosper as US specialty execs take pay cut DAY 1: SUNDAY 33 14 2015 +9.8% 2016 +3.4% 12 $12.2mn $11.5mn 10 +8.8% $9.3mn 8 +5.3% -17.6% 6 -14.7% $6.5mn 4 $5.3mn $4.2mn 2 -12.2%
Average CEO cpmesnation ($mn) CEO cpmesnation Average 0 $0.7mn US London US specialty Global Bermuda US large cap Brokers* nationwides carriers reinsurers *Excluding Aon Source: The Insurance Insider, company reports 2016 Bermuda CEO compensation 4.0 2015 3.7% 3.5 2016
3.0 2.7% Average: 2.4% 2.5 2.1% 2.0 2.1% 2.2% 1.5 1.4% 1.0 % of operating income income % of operating 0.5 0.0 Validus Axis Arch RenRe XL Catlin Aspen Source: The Insurance Insider, company reports
2016 Lloyd's CEO compensation 7 2015 2016 6 5.6% 5 4 Average: 2.9% 3 2.1% 2.2% 2 % of net income 1.2% 1 0 Hiscox Beazley Lancashire Novae Source: The Insurance Insider, company reports
2016 global reinsurer CEO compensation
1.8 2015 1.6 2016 1.4 1.3% 1.2 1.0 0.9% 0.8 0.6 Average: 0.5% % of net income % of net income 0.4 0.2 0.1% 0.1% 0.2% 0.0 Munich Re Swiss Re Hannover Re Everest Re Scor Source: The Insurance Insider, company reports
2016 US specialty CEO compensation 7 2015 2016 6.2% 6 5 4.3% 4 3.6% Average: 3.0% 3.3% 3 2.4% 2.8% 2 1.2% % of operating income % of operating 1 0.6% 0 Markel AmTrust WR Berkley The Hanover Argo AFG* RLI Navigators
*Represents salary for both co-CEOs Source: The Insurance Insider, company reports EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION
Risers and fallers he list of risers was predominately 2016 risers and fallers by ranking populated by brokers, but at the top T 2016 ranking Name Company Position Total 2016 pay Change in ranking stood Markus Riess of Munich Re, who climbed 77 positions as his remuneration Top 5 risers for the year more than doubled to 68 Markus Riess Munich Re CEO and Chairman of ERGO $3,892,476 +77 EUR3.2mn ($3.9mn). 47 John Greene Willis Towers Watson Former Legacy Willis Group CEO $4,898,097 +65 However, this was Riess’s rst full year of 67 J Powell Brown Brown & Brown CEO & President $3,917,651 +50 employment at the company, as he was 73 Mario Vitale Aspen CEO $3,825,759 +35 appointed CEO of the reinsurer’s primary 124 Chris Walker Brown & Brown EVP & President – Programs $2,044,634 +34 arm Ergo in September 2015, having Division previously worked at Allianz. Top 5 fallers John Greene, former legacy CEO at Willis 128 Matthew Fosh Novae CEO $1,866,572 -75 Towers Watson, made it into the top 50 at number 47, some 65 positions higher than 88 Clive Washbourn Beazley Head of Marine $3,171,582 -51 in the year before as his paycheck nearly 83 Je rey Kelly RenaissanceRe Former EVP, COO and CFO $3,377,088 -35 doubled to $4.9mn. 142 Charles Fry Novae CFO $1,232,091 -33 And rival broker Brown & Brown had two 107 Timothy Wright Willis Towers Watson Former WTW Head of Corporate $2,514,545 -32 entries among the top risers, with CEO J Risk & Broking; Former Legacy Willis Group CEO of International Powell Brown rising 50 ranks to number 67 with total earnings of $3.9mn, and executive Source: Company reports, The Insurance Insider vice president Chris Walker climbing 34 positions with earnings of $2.0mn. 2016 risers and fallers by change in earnings Looking at fallers, Novae dominated the Name Company Position Total 2016 Change Change in Change in list as none of its executives received any pay in pay company company book RoE value per share cash bonuses for the year. For the Londoner’s CEO Matthew Fosh, Top 5 risers this meant 61.0 percent less remuneration John Greene Willis Towers Former legacy Willis Group CFO $4,898,097 79.1% -0.2pts* N/A Watson in 2016 than in the year before, after he received a £1.3mn bonus in 2015. Dominic Casserley Willis Towers Former WTW president & deputy $15,430,339 71.2% -0.2pts* N/A Watson CEO; former legacy Willis Group CEO And former CFO Charles Fry, who left the Alan Schnitzer Travelers Vice chairman – nancial, $11,558,119 66.4% -1.7pts +4.0% company at the end of October, was also professional & international not given a bonus last year after receiving insurance and eld management; £990,000 in 2015. The executive’s base salary chief legal o cer also shrank by 16.7 percent year-on-year to David Herzog AIG Former EVP and CFO $10,738,460 60.7% -3.2pts -9.8% £275,000. J Powell Brown Brown & Brown CEO and president $3,917,651 56.4% -0.5pts* N/A But in absolute amounts, US specialty Top 5 fallers insurer AmTrust posted the largest executive Ronald E Pipoly, Jr AmTrust EVP and CFO $709,390 -77.9% -6.3pts +17.4% pay drops. Barry D Zyskind AmTrust President and CEO $4,902,193 -64.8% -6.3pts +17.4% The company’s two highest-paid executives saw more than half of their Matthew Fosh Novae CEO £1,215,000 -61.0% -8.1pts -4.2% earnings evaporate, as they received no Max Caviet AmTrust CEO of AIL $1,444,072 -56.8% -6.3pts +17.4% bonuses or non-equity compensation. Charles Fry Novae CFO £802,000 -55.4% -8.1pts -4.2% CEO Barry Zyskind was paid only $4.9mn *Change in adjusted Ebitda margin compared to $13.9mn in 2015, as his base Source: Company reports, The Insurance Insider salary reduced by 3.6 percent to $975,000. AmTrust has had a troubled few months, the past three years were no longer reliable. Consequently, the carrier’s share price had after it delayed its 10K ling for 2016 and Moreover, the revised reports that followed dropped by 53.8 percent in the year-to-date subsequently announced that its reports for revealed less pro ts than previously stated. as of 30 August close.
Continued from page 33 on-year. Berkley retired from the CEO position last Meanwhile, XL Catlin’s chief executive Mike year and earned less from stock awards and received a pay boost of 38.5 percent to McGavick held onto ninth position as his his non-equity incentive plan compensation. $12.8mn in 2016, propelling him six ranks pay fell marginally to $12.7mn for the year. The chief executive title was passed higher to eighth position. WR Berkley chairman Bill Berkley fell six on to his son, Robert Berkley Jr, whose Allstate CEO Thomas Wilson moved places to 10th position as his total earnings remuneration increased by 25.5 percent up just one rank to seventh place, as his decreased by 22.9 percent to $12.4mn in to $10.4mn, making him the 15th highest remuneration increased marginally year- 2016. earner last year.
34 DAY 1: SUNDAY Top 50 pay rises... 520 Top +1.8%50 pay rises... -11.8% 510520 +8.1% +1.8% -11.8% 500510 +8.1% 490500 480490 +5.6% 470480 +5.6% 460470 450460 440450 440
Top 50 total compensation ($mn) compensation 50 total Top 430 EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION
Top 50 total compensation ($mn) compensation 50 total Top 420430 2012 2013 2014 2015 2016 420 Source: The Insurance2012 Insider2013, company2014 reports 2015 2016
Source: The Insurance Insider, company reports Bermudian CEO remunerationBrokers prosper as US specialty execs take pay cut Brokers prosper as US specialty execs take pay cut 14 2015 +9.8% decreases in 201614 2016 +3.4% 2015 12 +9.8%$12.2mn ggregate total earnings for chief compensation2016 to $1.1mn. which halved year-on-year+3.4%$11.5mn to $144mn for 1012 +8.8% $12.2mn executives of Bermudian carriers fell Base salaries stayed constant in Bermuda 2016. +8.8% $11.5mn A 10 $9.3mn by 0.8 percent last year to $50.6mn. with the8 exception of Aspen CEO Chris +5.3%XL Catlin also paid a higher proportion of -17.6% $9.3mn And only one CEO in the Bermuda O’Kane,8 whose annual salary declined by +5.3%its operating income to its chief executive 6 -14.7% -17.6% $6.5mn composite was paid more than in the 11.7 percent year-on-year to $832,727. compared to its peers, with 2.7 percent of 46 -14.7% $5.3mn $6.5mn previous year. Consequently, the executive’s$4.2mn total earnings its pro ts, or $12.7mn, going to CEO Mike 4 $5.3mn Arch chief executive Dinos Iordanou went down2 -12.2% by 5.3 percent$4.2mn to $5.3mn. McGavick.
Average CEO cpmesnation ($mn) CEO cpmesnation Average -12.2% received a 15.1 percent pay boost, taking Nevertheless,02 $0.7mn this was equivalent to 3.7 McGavick and Iordanou were the only two US London US specialty Global Bermuda US large cap Brokers* Average CEO cpmesnation ($mn) CEO cpmesnation Average $0.7mn his earnings to $12.2mn for 2016, thanks percent0 ofnationwides the company’scarriers operating income, reinsurersBermudian entries in the top 10 earners. to a United Guaranty Corporation (UGC) US London US specialty Global Bermuda US large cap Brokers* *Excludingnationwides Aon carriers reinsurers Source: The Insurance Insider, company reports acquisition-related bonus of $1.5mn. *Excluding Aon Source:2016 The Insurance Bermuda Insider, company CEO reports compensation In August last year, Arch announced 2016 Bermuda CEO compensation plans to acquire AIG’s mortgage insurance 4.0 2016 Bermuda CEO compensation business UGC for a total consideration of 2015 3.7% 4.0 2016 $3.4bn. 3.5 2015 3.7% 3.5 2016 But in a subsequent analyst call discussing 3.0 2.7% the takeover, Iordanou revealed that he Average: 2.4% 2.53.0 2.7% would step down in March 2018 and chief Average: 2.4% 2.5 2.1% 2.0 2.1% 2.2% operating o cer Marc Grandisson would 2.1% 2.2% take over as CEO. 1.52.0 1.4% 2.1% 1.4% Meanwhile, at the other end of the 1.01.5 % of operating income income % of operating spectrum stood Ed Noonan, CEO of Validus, 1.0
% of operating income income % of operating 0.5 whose 2016 remuneration decreased by 17.5 0.00.5 percent year-on-year to $4.4mn, missing out Validus Axis Arch RenRe XL Catlin Aspen 0.0 on a place in the top 50. This was mainly due Source: The InsuranceValidus Insider, company reportsAxis Arch RenRe XL Catlin Aspen to a 43.2 reduction in non-equity incentive Source: The Insurance Insider, company reports Global reinsurers up their CEO2016 Lloyd's pay CEO compensation 7 2015 2016 Lloyd's CEO compensation otal remuneration increased year- Newly7 appointed2016 Swiss Re CEO Christian percent to EUR4.0mn. 6 2015 5.6% on-year for executives in the global Mumenthaler2016 earned CHF6.2mn ($6.6mn) Executive remuneration decreased across T 6 5.6% reinsurer cohort, with aggregate pay in his5 rst six months at the company, 10.9 the board at the reinsurance giant, with growing by 5.3 percent to $32.6mn, percent45 less than his predecessor Michel Liès the company’s top three earners posting Average: 2.9% adjusted for foreign exchange received34 in 2015. double-digit percent yearly drops. Average: 2.9% 2.1% 2.2% movements. Consequently,23 Mumenthaler was a new Meanwhile, Hannover Re’s CEO Ulrich % of net income 1.2% 2.1% 2.2% The best-paid CEO in the group was Denis entry2 in the top 50 as the 30th best-paid Wallin recorded a 13.5 percent increase
% of net income 1 Kessler of French carrier Scor, who earned CEO. 1.2% in remuneration to EUR1.9mn, which was 01 EUR8.0mn or $9.8mn using a ve-year At Munich Re,Hiscox Nikolaus von BomhardBeazley a signi Lancashire cant turnaround comparedNovae to a average exchange rate. maintained0 his ranking at number 45, 1.2 percent reduction in earnings the year Source: The InsuranceHiscox Insider, company reports Beazley Lancashire Novae Kessler’s pay rise was mostly fuelled by a despiteSource: The his Insurance earnings Insider, companyreducing reports by 10.5 before. boost in performance share unit awards from EUR3.1mn to EUR5.2mn, which enabled him 2016 global reinsurer CEO compensation to climb seven ranks year-on-year to 17th 2016 global reinsurer2016 global CEO reinsurercompensation CEO compensation 1.8 2015 place in our list of the best-paid executives in 1.61.8 2016 the industry. 2015 1.41.6 2016 1.3% He also received the largest share of net 1.21.4 1.3% income among his peers, with his total 1.0 remuneration equivalent to 1.3 percent of 1.2 0.9% 1.0 Scor’s net income for the year. 0.8 0.9% 0.60.8 Average: 0.5%
Five ranks below Kessler stood Dom % of net income 0.40.6 Average: 0.5% Addesso, CEO of Everest Re, with total pay % of net income of $8.8mn for the year – up 8.2 percent from 0.20.4 0.1% 0.1% 0.2% 2015. 0.00.2 0.1% 0.1% 0.2% Munich Re Swiss Re Hannover Re Everest Re Scor Addesso ranked 23rd in our top 50 league 0.0 Source: The InsuranceMunich Insider Re, company reportsSwiss Re Hannover Re Everest Re Scor table, four positons behind his prior-year Source: The Insurance Insider, company reports performance.
2016 US specialty CEO compensation DAY 1: SUNDAY 7 2015 2016 US specialty CEO compensation 35 2016 6.2% 67 2015 2016 6.2% 56 4.3% 5 4 3.6% Average: 3.0% 3.3% 4.3% 34 3.6% Average: 3.0% 2.4% 3.3% 3 2.8% 2 2.4% 1.2% 2.8% % of operating income % of operating 2 1 0.6% 1.2% % of operating income % of operating 01 0.6% 0 Markel AmTrust WR Berkley The Hanover Argo AFG* RLI Navigators Markel AmTrust WR Berkley The Hanover Argo AFG* RLI Navigators *Represents salary for both co-CEOs Source: The Insurance Insider, company reports *Represents salary for both co-CEOs Source: The Insurance Insider, company reports GLOBAL EXPERTISE LOCAL PRESENCE
We specialise in providing customised solutions to our clients across an array of geographies and products. Our network of offices gives us access to expertise around the world. Our relationships are far reaching. 360° THINKING Find out more at aspen-re.com EXECUTIVE COMPENSATION Q&A
The interview: Wasef Jabsheh
You started in insurance 50 years ago at in north and west Africa. the rst Gulf insurer, Kuwait Insurance Co. IGI H1 2017 stats We are also doing business with Singapore. What was it like back then? Japan and Malaysia are potential areas for I’ve been in this business longer than digital Gross written premium: $138.1mn growth, as well as prospective expansion calculators – we used to divide, add and Shareholders’ equity: $322.9mn in the Paci c region. We always work with subtract by hand. Coming from an American Assets: $824.2mn the local insurance market where we aim to university, I got given all the tough jobs Rating: A- stable outlook by S&P bolster ties and forge partnerships. and after a year I was handed the energy Global business – it was rare to be to be from the Rating: A- positive outlook by AM Best How easy is it for foreign insurers to crack Middle East and a specialist in the area. the Middle Eastern market? I remember in the late 1960s I insured a What are your premium rate expectations? There is a misconception that the Middle re nery in Kuwait which was worth about I have seen this cycle many times in my East is one homogenous area and that $400mn – there wasn’t enough capacity to lifetime and I know from experience that exposures across it are homogenous cover 100 percent of it in the world! soft market conditions do not last forever. too. However, the region is very diverse More generally, actuaries were only used in The desire of many players during these geographically, politically and economically. the life business, modelling didn’t exist and challenging times to abandon underwriting For example, we get snow in Jordan and regulation was very primitive. In the 1970s discipline in favour of top line growth will ash oods in Oman. Even within the you could start an insurance business in the invariably exert pressure on their pro t same country, there can be di erences and UK with £2.5mn ($3.2mn) of capital and that margins. The market will eventually bottom variations. IGI prevails over its competition was an accepted security. and companies with prudent planning and because of our focus on addressing and risk selection and disciplined underwriting understanding country and region-speci c You then helped establish Abu Dhabi will ultimately prevail. conditions, and drawing on the knowledge National Insurance Company (ADNIC). Tell Moreover, a rise in interest rates will help and skills of local expertise. Local knowledge us about it. the market, and if there are big cat losses in is a fundamental factor in the success of the ADNIC started from scratch with $1.35mn the world, there will be change. business process. in capital and the company developed tremendously as a multi-line business with What about the energy market? You had to leave your home in Jerusalem a concentration on energy. It was tough I think we are certainly coming to an end of abruptly with the Israeli invasion at though – at the time nobody in the Middle the soft market in this sector in particular. the start of the six-day war in 1967 and East knew anything about onshore oil Energy is a promising market and insurance moved to Kuwait, without seeing your business, all the expertise was in London. spending in this sector is expected to parents for two years. How did that feel? However, we expanded quickly and upsurge in the coming few years. Of course, On 4 June 1967, I submitted my last nal eventually started to write business in the there is always someone willing to slash exam for graduating from university, and whole of the Gulf and the Middle East, and [rates], but generally, we are not seeing a on the very next day; 5 June, war broke even in Europe and the US. deterioration of terms. out. Overnight I had no home to go back to I like challenges and this experience, as because of the Israeli occupation. Insurance well as other skills I gained over the years, You recently diversi ed into legal was the rst job o ered to me in exile and I worked well in the establishment and expenses. Where else will you expand? took it immediately as I was in dire need for growth of IGI. We are always on the lookout for new income at that time. opportunities. The renewable energy sector Just imagine not having the option of What else does the sector need to do to is expected to grow considerably over the going home! It is a horrible experience and mature? coming few years. Britain is to ban diesel and it may have been the reason behind my Consolidate. I’ve had a front seat view at gasoline cars by 2040. The Paris Conference determination and perseverance in life, as I the birth and evolution of the reinsurance has many implications for the energy sector. felt that “I am all on my own and I have no industry in the Middle East and at the The Middle East will follow in the footsteps option but to make it”. moment there are too many companies of what is happening elsewhere. We already in the region and it’s a waste of capital. write business in renewable energy and are Consolidation forms big companies that can well prepared for future business in this area. stand on their own and compete worldwide. Our region is scattered with many insurance Where are you expanding regionally? companies of small scale competing for It is only in the last 10 to 20 years that Africa a piece of the same pie. In my opinion, has opened up and investment has started maturity in the Middle East can only be to ow into the continent. Africa is not an achieved through the joining of forces and easy market, but is promising – for example, resources. Also, further growth in the region East Africa has seen recent oil and gas Wasef Jabsheh depends on the development of expertise discoveries. Our o ce in Casablanca writes Founder, CEO and vice chairman, – I was hoping to see a much bigger African business and the IGI o ce in the International General Insurance improvement over the years. DIFC in Dubai also writes all lines of business
DAY 1: SUNDAY 37 29 SEPTEMBER 2017 12.30 – 15.00
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