RENDEZ-VOUS REPORTER DAY 2: MONDAY SEPTEMBER 10 2018

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Benchimol backs Lloyd’s remediation moves

AXIS Capital chief executive Albert Benchimol is it needs to address and the overall profitability of Contents “highly encouraged” by the moves being made by Lloyd’s is challenged right now,” he told Reactions. Change the Jon Hancock and his team to strengthen Lloyd’s and AXIS increased its investment in Lloyd’s last year Pool for good...... 3 improve the market’s profitability. with the circa-$600m acquisition of Novae, and GC’s insurtech matchmaking Back in June, Lloyd’s performance management Benchimol said the Corporation’s commitment to service...... 4 director Jon Hancock outlined a plan which will improve syndicates’ performance made the deal Organic growth for force syndicates to deliver a sustained profitable increasingly attractive. Greenlight Re...... 7 performance or risk being closed. The market ended “I am highly encouraged with some of the moves Insurance brings 2017 with an underwriting loss of £3.4bn, with we are seeing,” said Benchimol, adding: “I think Jon stability...... 7 attritional losses and heavy natural catastrophe claims Hancock’s initiative to put pressure on individual Tailwinds ahead for QBE NA...... 8 taking their toll on the market. Lloyd’s distribution syndicates to look at their worst performing business Plugging China’s costs also continue to plague One Lime Street, further and take serious action to improve their profitability is protection gap...10 pushing down syndicates’ ability to turn a profit. absolutely the right move by the market.” Reinsurers to focus In response, Hancock revealed a plan earlier this As Benchimol explained, Hancock’s moves may on bottom line....13 summer that will force syndicates which have ended lead to a lower level of premium being generated by PERILS profile set each of the last three years in the red to submit the Lloyd’s, but that will ultimately lead to the to grow...... 13 a credible business plan that will return them market becoming more profitable. GC fires a warning shot at MGAs...... 14 to a profit in the near term. Those syndicates “I support that fully,” Benchimol told M&A not always who fail to submit a viable plan face closure. Reactions. “I am encouraged that some a financial Lloyd’s has also called on syndicates to companies have decided to get out of one godsend...... 14 highlight the repeatedly worst performing 10% line of business or another. I encourage The future is green of their businesses before creating a plan which their efforts to no longer participate for ILS...... 16 Insurtech teams will bring these units back into the black. in lines of business where they are up with agri...... 19 Benchimol, who also serves AXIS not profitable. Europe swells, as president, said that while “We would all be better Bermuda sinks...20 Lloyd’s remains the global centre off, including AXIS, by Montador meets for specialty risk, it does have looking at our portfolios Reactions...... 22 some challenges. and deciding where we Supporting adaptation...... 25 “Lloyd’s has an expense problem Continued on page 4

Can we harness data to better protect against the threats from forces of nature?

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Great things happen together

Increasingly natural disasters are putting an uncertain global economy under even more stress. At times like these, it’s more important than ever to work with a strong and experienced partner who really knows the market and the challenges ahead. At Swiss Re, we work together with you, leveraging our extensive natural catastrophe expertise and digital innovation skills to create solutions to help your business succeed. Solutions like our real-time parametric insurance off er your customers instant pay outs based on a predefi ned trigger. Innovative solutions to help you better serve existing markets, grow into new ones and effi ciently manage your risks. Because great things happen together. We’re smarter together.

Come and join us on Avenue de Monte Carlo, 9–12 September. Follow us on swissre.com/montecarlo2018 Earthquakes: breaking new ground in disaster preparedness

When the earth starts to shake, preparedness is everything. collapse or were severely damaged had been built before measures. That means working together with the public Unlike traditional insurance, parametric products no longer Measures such as building codes and emergency evacuation 1987 when new anti-seismic provisions were introduced. sector to systematically identify seismic risk, draw up require any loss adjustment in the event of an earthquake. plans can make all the difference. They significantly increase By contrast, those that withstood the impact had been potential scenarios and raise awareness. In addition, it is Payouts are quick and administrative costs are low. the odds of saving lives in the event of an earthquake. constructed in accordance with newer standards. necessary to quantify all risks, taking into account their Increasingly, insurers and reinsurers like Swiss Re are Considering that many of the world’s major cities are located potential loss amounts and probability of occurrence. offering parametric products as part of a fully automated, in quake-prone areas – from Tokyo to Istanbul, Mexico City It is a similar story in Italy where only 1% of residential The next step is to discuss the residual risk and clarify cloud-based insurance solution. Features are modular and or Los Angeles – the importance of such measures cannot buildings are insured against earthquake risk. The last how the potential financial losses can be covered. This is include real-time reporting, dynamic pricing and automated be stressed enough. major quakes to hit central Italy in 2016 caused combined particularly challenging in the case of wider secondary claims payments. In fact, there’s no need for lengthy claims economic losses of USD 6 billion, of which only impacts, such as disruption to business and supply chains. procedures, since payments are made instantaneously when Saving lives is top priority, coping with USD 200 million were insured. Historically, the Italian a predefined trigger is reached. catastrophic losses a close second government has intervened with disaster emergency Innovative digital solutions offer new options Yet, even the most stringent measures cannot prevent all relief and reconstruction measures. But in light of An integrated risk management strategy ensures that Building resilience on shaking ground possible damage. This is why millions of people and already overstretched public budgets, this is an option insurance options stay available and affordable. Besides Major earthquakes such as those experienced in recent businesses around the world remain heavily exposed to that is becoming too costly and ineffectual. traditional indemnity-based insurance covers, parametric years in Japan, Mexico, Haiti or New Zealand remain potentially large financial losses caused by earthquakes. solutions are increasingly becoming an attractive alternative exceptional. But they serve as a stark reminder that a There is of course the immediate risk to homes, offices and An integrated risk management approach is vital to protect against earthquake risk. Parametric covers are destructive tremor can strike without warning in any of the physical infrastructure. But often overlooked are the costly The insurance industry has the knowledge and financial based on a pre-defined index, such as the magnitude of an world’s earthquake zones. Being prepared is the best option ripple effects: destructive aftershocks, tsunamis in coastal capacity to step in and close the ever widening protection earthquake, and trigger payment when that threshold is to keep safe. Insurance can help people and economies regions, landslides and subsidence, not to mention gap. It can only do so, however, if the risk from earthquakes reached. In Turkey and Japan, for example, Swiss Re has rebound quickly after the shock. New product innovations production stoppages and disruption to global supply chains. is addressed through an integrated risk management been offering index-based earthquake covers for business have opened up the possibility of bringing affordable approach that combines risk prevention and risk transfer interruption for some time. insurance protection to many more communities around the This is where insurance comes in. Unlike physical protection world. Together, let’s make things happen and turn this measures, insurance cannot prevent the loss of life. But possibility into reality. insurance can make all the difference when it comes to the question of whether or not the economic damage from an earthquake poses an existential threat to those affected. It plays a key role in helping people and businesses get back on their feet and allowing the economy to recover swiftly after an earthquake. Online tools such as Swiss Re’s CatNet® provide information on where earthquakes are likely to occur, what the loss potential is in any given location and how to price earthquake risk when developing insurance solutions. In recent years, the insurance industry has created more sophisticated earthquake models and given greater attention to losses associated with business interruption and industrial production shortfalls.

Closing the protection gap – still a challenge In spite of these recent advances, however, a significant gap in coverage for earthquake risk exists around the world. Even in earthquake-prone areas, insurance take-up rates continue to be low. In Mexico, for example, only about 5% of homes carry earthquake insurance. When in September 2017 two of the most powerful earthquakes hit the regions of Tehuantepec and Puebla in the span of two weeks, close to 500 people lost their lives and over 142 000 properties were damaged. The total economic loss amounted to over USD 12 billion, but only USD 1.6 billion was insured.

Last year’s tremors in Mexico reveal a significant protection gap in a country that faces high earthquake risk and where the government has been working hard for years to promote disaster preparedness. While there is clearly more work to be done, the government’s efforts have paid off: the events also confirmed that, when enforced, zoning laws and building codes do work. Most of the buildings that did Earthquakes: breaking new ground in disaster preparedness

When the earth starts to shake, preparedness is everything. collapse or were severely damaged had been built before measures. That means working together with the public Unlike traditional insurance, parametric products no longer Measures such as building codes and emergency evacuation 1987 when new anti-seismic provisions were introduced. sector to systematically identify seismic risk, draw up require any loss adjustment in the event of an earthquake. plans can make all the difference. They significantly increase By contrast, those that withstood the impact had been potential scenarios and raise awareness. In addition, it is Payouts are quick and administrative costs are low. the odds of saving lives in the event of an earthquake. constructed in accordance with newer standards. necessary to quantify all risks, taking into account their Increasingly, insurers and reinsurers like Swiss Re are Considering that many of the world’s major cities are located potential loss amounts and probability of occurrence. offering parametric products as part of a fully automated, in quake-prone areas – from Tokyo to Istanbul, Mexico City It is a similar story in Italy where only 1% of residential The next step is to discuss the residual risk and clarify cloud-based insurance solution. Features are modular and or Los Angeles – the importance of such measures cannot buildings are insured against earthquake risk. The last how the potential financial losses can be covered. This is include real-time reporting, dynamic pricing and automated be stressed enough. major quakes to hit central Italy in 2016 caused combined particularly challenging in the case of wider secondary claims payments. In fact, there’s no need for lengthy claims economic losses of USD 6 billion, of which only impacts, such as disruption to business and supply chains. procedures, since payments are made instantaneously when Saving lives is top priority, coping with USD 200 million were insured. Historically, the Italian a predefined trigger is reached. catastrophic losses a close second government has intervened with disaster emergency Innovative digital solutions offer new options Yet, even the most stringent measures cannot prevent all relief and reconstruction measures. But in light of An integrated risk management strategy ensures that Building resilience on shaking ground possible damage. This is why millions of people and already overstretched public budgets, this is an option insurance options stay available and affordable. Besides Major earthquakes such as those experienced in recent businesses around the world remain heavily exposed to that is becoming too costly and ineffectual. traditional indemnity-based insurance covers, parametric years in Japan, Mexico, Haiti or New Zealand remain potentially large financial losses caused by earthquakes. solutions are increasingly becoming an attractive alternative exceptional. But they serve as a stark reminder that a There is of course the immediate risk to homes, offices and An integrated risk management approach is vital to protect against earthquake risk. Parametric covers are destructive tremor can strike without warning in any of the physical infrastructure. But often overlooked are the costly The insurance industry has the knowledge and financial based on a pre-defined index, such as the magnitude of an world’s earthquake zones. Being prepared is the best option ripple effects: destructive aftershocks, tsunamis in coastal capacity to step in and close the ever widening protection earthquake, and trigger payment when that threshold is to keep safe. Insurance can help people and economies regions, landslides and subsidence, not to mention gap. It can only do so, however, if the risk from earthquakes reached. In Turkey and Japan, for example, Swiss Re has rebound quickly after the shock. New product innovations production stoppages and disruption to global supply chains. is addressed through an integrated risk management been offering index-based earthquake covers for business have opened up the possibility of bringing affordable approach that combines risk prevention and risk transfer interruption for some time. insurance protection to many more communities around the This is where insurance comes in. Unlike physical protection world. Together, let’s make things happen and turn this measures, insurance cannot prevent the loss of life. But possibility into reality. insurance can make all the difference when it comes to the question of whether or not the economic damage from an earthquake poses an existential threat to those affected. It plays a key role in helping people and businesses get back on their feet and allowing the economy to recover swiftly after an earthquake. Online tools such as Swiss Re’s CatNet® provide information on where earthquakes are likely to occur, what the loss potential is in any given location and how to price earthquake risk when developing insurance solutions. In recent years, the insurance industry has created more sophisticated earthquake models and given greater attention to losses associated with business interruption and industrial production shortfalls.

Closing the protection gap – still a challenge In spite of these recent advances, however, a significant gap in coverage for earthquake risk exists around the world. Even in earthquake-prone areas, insurance take-up rates continue to be low. In Mexico, for example, only about 5% of homes carry earthquake insurance. When in September 2017 two of the most powerful earthquakes hit the regions of Tehuantepec and Puebla in the span of two weeks, close to 500 people lost their lives and over 142 000 properties were damaged. The total economic loss amounted to over USD 12 billion, but only USD 1.6 billion was insured.

Last year’s tremors in Mexico reveal a significant protection gap in a country that faces high earthquake risk and where the government has been working hard for years to promote disaster preparedness. While there is clearly more work to be done, the government’s efforts have paid off: the events also confirmed that, when enforced, zoning laws and building codes do work. Most of the buildings that did NEWS

Change the Pool for good

It has already been a busy 2018 for comfortable with our understanding, our “The World Bank has done a similar Pool Re, with the government-backed modelling of the risk, so they get a feeling idea with pandemic flu, so there are a terrorism reinsurance scheme unveiling that we know what we’re talking about. number of these unusual risks beginning details of its new business interruption Whilst the problem with terrorism is, of to be looked at. The UK has provided the protection as well as various regulatory course, the modelling and the difficulty in basis for doing ILS, and I think it would and financial hurdles the operation has prescribing the frequency element to it. be a mistake if all we did was try and had to contend with. Now that could cause real problems – we compete with Bermuda to do the same But, as Julian Enoizi, the chief executive may be sitting here in six months, saying type of nat cat as everyone else. of Pool Re, explained to Reactions, it is we tried, but we didn’t make it.” “We should be looking at bringing new the utilisation of the insurance linked Enoizi is positive about ILS and its risk and closing that protection gap,” securities (ILS) market that has had the effects, but is more cautious than some he adds. most impact. others in the market, though. “That’s what we should be using the “The biggest reinsurance project for us “It’s a natural evolution,” he says, “if you legislation for to look for new, different is the ILS; our reinsurance programme think about the amount of reinsurance types of risk as opposed to competing on for the standard property non-damage premium, £50bn or £60bn, and if you the basis of traditional risks.” business interruption is now well- look at the capital markets, it’s vast and At the same time, Enoizi is keen to established, well-supported, and we’ve dwarves it. It’s a factor that we’re going to push ahead and further develop the nudged it up every year as people get have to get used to.” product Pool Re can offer the UK’s more comfortable with the risk, and we’re “And you’ve got to think about how insurance industry. at £2.1bn,” explains Enoizi. you’re going to match capital to risk, “Removal of the cyber exclusion, along “If we can continue to increase that therein lies the challenge. Because, at the with incoming legislation to allow us to then we will continue to do so. Monte moment, it’s a relatively small amount of cover non-damage business interruption, Carlo is an opportunity for us to take a risk they are covering- and its stuff that is both represent a new global standard mid-year check, almost. We’re working highly modellable, nat cats. This is not a of terrorism cover,” said Enoizi at the on improving modelling, and data, and natural cat, it’s a man-made catastrophe; June AGM. so every year the information that we’re it’s not easy to model, and the way we By updating what it offers the market, improving to the reinsurance market is view this is not only could it be the first Pool Re will be in a better position to getting better. terrorism ILS in the world, but set a support its insureds throughout the UK “The big thing for us this year is really standard for difficult to model, risk to from the rapidly evolving threat posed by whether or not we can now we can be placed into the capital markets with terrorism. l get the capital markets to support that a certain set of caveats, and control, that property damage programme with an ILS could form a basis for the future.” placement,” he says. This is a new prospect and one that is At Pool Re’s annual general meeting, in not often brought – something Enoizi

June Enoizi said they were exploring the knows all too well. Managing Editor Printing: Pure Design, France Christopher Munro possibility of issuing ground-breaking ILS +1 212 224 3473 Annual subscription rates: [email protected] Corporate multi-user rates are available, please contact for terrorism retrocession. Senior Reporter [email protected] John Hewitt Jones Single user: £1,092 / $1,837.50 / “Following a change in the UK’s +44 (0)20 7779 8218 €1,485 legislative environment conducive to a [email protected] US Reporter Subscription hotline: greater harnessing of this international Michael Heusner London: +44 (0)20 7779 8999 +1 212 224 3479 New York: +1 212 224 3570 capacity. We will also continue to share [email protected] Contributing Editor Back issues: expertise and knowledge through IFTRIP, Garry Booth +44 (0)20 7779 8999 +44 (0)1986 874 161 Subscribers: £27.50; the international community of terrorism [email protected] Non-subscribers: £45.00 ISSN 0953-5640 reinsurance pools around the world Design & Production Customer services: Siobhan Brownlow +44 (0)20 7779 8610 committed to boosting global resilience Paul Sargent Publisher to terrorism.” Goran Pandzic Reactions is a member of the Audit +1 212 224 3711 or +1 917 340 6197 Bureau of Circulations. Reactions (ISSN There is a heavy set of regulatory pieces [email protected] No. 002-263) is an online information service supported by a print magazine to get though first before this could Business Development Manager published by Euromoney Institutional Bill Schauer Investor PLC. become a reality, he adds, and +1 212 224 3485 ©Euromoney Institutional Investor [email protected] PLC London 2018. Although then it is about meeting the Conference Producer & Coordinator Euromoney Institutional Investor PLC David McClure has made every effort to ensure the market and making sure both +1 212 224 3712 accuracy of this publication, neither [email protected] it nor any contributor can accept any sides are comfortable in legal responsibility whatsoever for Divisional Director consequences that may arise from this space. Danny Williams errors or omissions or any opinions or Reactions: 3rd Floor, 41 Eastcheap, advice given. This publication is not a “We have to make London, EC3M 1DT, UK substitute for professional advice on a sure the markets are specific transaction

RENDEZ-VOUS REPORTER: MONDAY SEPTEMBER 10 2018 www.reactionsnet.com | 3 NEWS

GC’s insurtech matchmaking service

The sheer number of insurtech businesses by Numerati Partners, the technical digital natives have different expectations around the world is a problem for assessment engine of the Alliance,” over how they interact with service insurers searching for tools or services Yoder told Reactions. providers, whether it’s through mobile that could transform their business Vicky Carter, vice chairman, strategic devices or voice recognition,” Yoder model, according to reinsurance broker advisory, added: “The time and the explains. Guy Carpenter. expense and the resource to navigate “On the underwriting side the emphasis The firm has responded by expanding around this area of insurtech is huge and is on new sources of data that help its insurtech advisory offering to form costly. We are condensing the process insurers understand exposures better. GC Genesis, spearheaded by Claude to identify the start-ups that are most On the claims side, transforming Yoder, the firm’s innovation and product relevant to any client’s needs.” claims notes into meaningful insights is development officer. The service starts with a fitting process another example.” The initiative complements the InsurTech that provides a review of a Yoder says the Alliance launched Alliance service, a collaboration between company’s current growth, with Numerati Partners in July Guy Carpenter and Numerati Partners that profit, and cost reduction has been well received: “The was announced in July. strategies in the context of response has been overwhelming “There are so many start-ups out there its current capabilities and in terms of the number of clients – well over 2,000 – it’s hard for insurers new services or startups that expressing interest but also the to know where to begin. Our service might accelerate its plans. diversity in terms of geography identifies which start-ups make most “Client interaction, and product mix – and their sense for individual clients. Then the underwriting and claims are level of sophistication. Carriers client can take a smaller sub-set of start- the main focus areas. On everywhere realise how fast the ups forward into the InsurTech Alliance client interaction or technology is developing where a deeper technical evaluation of distribution for and they don’t want the start-up’s capabilities is performed example, today’s to be left behind.” l

Continued from page 1 in 2018, where Novae has recorded an “Ultimately that will lead to better are relevant, adding value and being underwriting profit.” underwriting and better efficiency at profitable. We need to focus our energy It is not just Hancock’s moves to Lloyd’s,” he added. and capital on that rather than areas or improve the market’s profitability that The market has already started to business lines where we are not relevant, has impressed Benchimol however, with embrace the Placing Platform Ltd (PPL), adding value or profitable. Lloyd’s push to modernise through the with figures from Lloyd’s showing that “We can leave that to those who have a use of electronic placement also earning syndicates accepted 16.3% of in scope better product and who can get a better praise from AXIS’ head. risks through electronic placement in the return. If we did that, the entire industry three months to June 30, 2018. would be better off, and I think we’re “Lloyd’s mandating As the market noted, 56% of syndicates beginning to see that now.” that we use electronic met or exceeded the target of having at One of the reasons why AXIS was placement to improve least 10% of in scope risks placed via PPL attracted to Novae in the first place was during that quarter. that Matthew Fosh and the London market efficiency is something At the time of the announcement in carrier’s leadership team had actually I applaud… Ultimately August, Lloyd’s chief operating officer started on that process long before Hancock that will lead to better Shirine Khoury-Haq said the market was and Lloyd’s had called on syndicates to take underwriting and better encouraged by the support and effort that a closer look at their books. efficiency at Lloyd’s” has been received for the project so far. “Novae had gone through a strategic Albert Benchimol, AXIS Capital Khoury-Haq, who is also the sponsor review where it identified lines of of the London Market Target Operating business where they were relevant and Model programme, added: “Further profitable and decided to stay in those “Lloyd’s mandating that we use adoption will help the market increase lines, and develop them. In those lines electronic placement to improve efficiency, reduce back office costs and, where Novae wasn’t relevant or profitable, efficiency is something I applaud – I most importantly, improve client service. it exited them. really do encourage Lloyd’s to continue We are using the feedback we have “We were very excited to acquire Novae to put pressure on the syndicates and received to work with our syndicates, because they were already well on their managing agents to improve their the associations and our brokers to build way to improve their portfolio. That’s underwriting and to improve their on the momentum generated by these been proven by the results we’ve seen efficiency,” Benchimol stated. positive results.” l

4 | www.reactionsnet.com RENDEZ-VOUS REPORTER: MONDAY SEPTEMBER 10 2018 Focus.

At Markel, strategy and execution are equally important.

We are mindful of the big picture, and we are relentless when it comes to process improvement, technology deployment, and strengthening relationships.

Paying attention to details . . . that’s the Markel Style.

Markel Global Reinsurance | Markel Assurance Markel CATCo | Markel Digital | Markel International Markel Specialty | Markel Ventures | State National markelcorp.com

NEWS

Organic growth for Greenlight Re

Greenlight Re will be spending the rest Hartford’s acquisition of Navigators, of this year and early 2019 expanding AXA’s acquisition of XL Catlin, and its horizons and is aiming to do so Markel’s purchase of Nephila, Barry was organically rather than through mergers firm on Greenlight Re’s stance when it and acquisitions (M&A), according to comes to acquiring another firm, or being chief underwriting officer Brendan Barry. acquired itself. “Our focus has been on stabilising the “In terms of M&A, we have no M&A core portfolio, which was built on US plans. We look at things from time to quota share, and we’re looking to expand time but there’s nothing in our immediate from there into what we regard as higher future. The issue for me is more from margin lines of business. an industry perspective. We’re going to “US mortgage was one of the first ones continue to execute the strategy we have, we wrote, and that’s becoming quite a and if an M&A opportunity comes along popular line in the industry but we’ve year, execution on that went pretty well that we thing furthers that strategy, we’ll been writing that for about four years from our perspective at 1/1 and into have a look at it. now. Last year we started to focus on this year both in terms of transactions “However, for the industry as a whole it non-US higher margin areas, so London done and relationships established. We’re seems like M&A is the strategy for a lot of market specialty I would say is a priority really looking to expand on that rather people. But it’s not a strategy. It’s a tool for for us. Satellite, marine, energy, terrorism, than anything earth-shatteringly new,” execution, and what we’re seeing I think expansion of our financial lines, trade Barry said. is an inability to grow the business, heavy credit surety and title insurance are According to Barry, Greenlight Re has cost structure, and people thinking M&A lines we are beginning to write,” he addressed some of its previous troubles will solve those peoples – they won’t. told Reactions during the Monte Carlo regarding legacy contracts as well. They’ll give them a short-term boost, and Rendez-Vous de Septembre. And in the current atmosphere of you’ll have a bigger company with some “We really started to focus on it last rampant M&A that has included The of the same issues you had before.” l Insurance brings stability to wobbly markets

Turmoil in emerging economies’ financial more than 20 years’ experience in on bringing protection to emerging markets and trade tensions between business origination and re/insurance economies is a priority,” he says. “As an the US and China have cast a cloud structuring including alternative capital. industry we need to get better at geo- over the holidays for many active in the He works closely with multilaterals, coding, improving the data granularity region. But XL Catlin’s head of emerging regulators, governmental stakeholders, available in vendor models that’s already markets Brendan Plessis believes that NGOs, distribution sources and available in mature economies. the uncertainties around the future industry leaders to try to increase re/ “At XL Catlin we especially want to of previously high growth economies insurance penetration and resilience in refine that modelling ability so that we can underlines the shock absorbing qualities emerging markets. deploy parametric techniques to providing of the insurance industry. That means looking for profitable cat coverage to existing customers, new “Contagion across several fragile growth through local partnerships customers and also government public/ economies, over-reliance on the US to industry-wide efforts to close the private structures,” he adds. dollar and the debt levels that have protection gap. Earlier this year AXA announced that it been built up in US currency is a Internally, Plessis spearheads is to acquire 100% of XL Group Ltd. Total real worry obviously,” Plessis says. these efforts bringing consideration for the acquisition would “What we provide as an industry together multi-disciplinary amount to $15.3bn, to be fully paid in in moments of crisis, whether teams across XL Catlin, in cash. Under the terms of the transaction, it is through political risk type the insurance, reinsurance XL Group shareholders will receive products (for investors) or through and investment segments, to $57.60 per share, representing a premium nat cat reinsurance and speed of develop re/insurance solutions. of 33% to XL Group closing share price response on claims, is a “How we can bring third on March 2, 2018. critically stabilising party ILS capital to The deal will create the biggest global influence.” work more closely P&C commercial lines insurer based on Plessis has with reinsurers gross written premiums. l

RENDEZ-VOUS REPORTER: MONDAY SEPTEMBER 10 2018 www.reactionsnet.com | 7 NEWS

Tailwinds ahead for QBE North America

QBE’s North American business is in In North America, agricultural good shape going into the second half of insurance accounted for 41.2% of QBE’s the year, with a simpler business model total gross written premiums. expected to continue to drive profitability. “The rest of it is really our consolidated The North American branch of the model, what we call the integrated Australian firm has much to celebrate specialist approach. We think we have a with marked improvements almost unique value proposition. The way we can across the entire board for the first half of go to market is with the entire portfolio the year. of products. The way the industry has Overall first half gross written premiums traditionally divided itself is that you’ll for QBE North America were $2.89bn, have one person knocking on your door up 3% from the gross written premiums with their P&C products, and then recorded for the same period in 2017. another coming in with their specialty QBE North America’s underwriting products. We think we’re very unique in results of $78m for the first half of 2018 the way we go to the market selling all were also up 179% compared with “Crop has really been those products at once,” he continued. the first six months of 2017, while the dominated by the bigger He also expects the improvements to combined ratio for the period improved players, and we’re one of persist as time goes on and QBE begins to slightly from 98.2% for the first half the top writers there, and solidify its identity in North America. of 2017 to 97.8% for the same period we’re very bullish on our “For me I see more tailwinds than in 2018. headwinds,” Franzetti said. Its ongoing withdrawal from North ability to write crop and “A big part of that is crop which American personal lines business is service it well.” continues, but it also shows the actions we expected to lead to material cost savings, Daniel Franzetti, QBE took at the end of last year, such as being while the focus from now on will be on more conservative with our claims ratio. four core segments, crop, specialty, P&C, With the exception of some benefit from and reinsurance written through QBE Re. Franzetti attributed QBE North our crop prior-year reserves, our business “One of our stated priorities this year America’s improved business metrics more recently has delivered in line with really was to simplify QBE, and we looked to several factors, one of which was the our expectations, which I think is the at [certain aspects of our personal lines continued positive performance of its beginning of this positive momentum for business] and it really wasn’t core to us - crop segment. us. It shows that the actions we took last it’s very difficult unless you have massive “In North America we feel very good year were the right ones. scale in that particular aspect of it,” said about our crop business,” Franzetti said. “We’re seeing premium rate increase of Daniel Franzetti, chief operating officer of “Crop has really been dominated by the 3%, compared to less than 1% in the prior QBE North America. bigger players, and we’re one of the top period. For us, we do have customers in According to Franzetti, the move was writers there, and we’re very bullish on our catastrophe-prone areas, so I’m really made with the firm’s independent agent ability to write crop and service it well.” proud of our response. I look at the network in mind, following the transfer Crop insurance has been the second response we had to Irma and Harvey of its personal insurance independent largest line of business written by QBE as last year. We contacted 100% of our agency polices in 47 states to Safeco a whole in both 2017 and 2018, at 17.1% policyholders within 24 hours. in August. and 16.7% respectively. “I think because we got off the ground so well with those events last year, that we really have not seen any lingering impacts Tumultuous times in US crop this year.” QBE’s positive results from its North American crop business comes at a time when the In addition to focusing on the basics wider US agricultural sector finds itself in some difficulties. of, QBE is also focused on increasing the US farmers and the insurers that cover them are keeping a close eye on developments integration of various technology services, in Washington as trade tariffs imposed by the US government, an expiring Farm Bill and through partnerships and investments promised aid that may or may not actually materialise all coalesce at once. in a number of insurtech firms such as Arguably the most pressing issue for the sector’s insurers is the passage of the Agriculture Improvement Act of 2018, or Farm Bill, which is due to expire this month. RiskGenius, Jupiter Intelligence, and Cytora. As Brian Young, chief executive of Crop Risk Services, told Reactions, crop insurance is The entirety of the firm’s North permanently authorised under the Federal Crop Insurance Act. But if the Farm Bill does not American specialty team is now using pass, then farmers and insurers cannot plan ahead. RiskGenius less than a year after “We depend on that Farm Bill to bring certainty and plan our investments,” Young said. their partnership, confirming their commitment to the insurtech space. l

8 | www.reactionsnet.com RENDEZ-VOUS REPORTER: MONDAY SEPTEMBER 10 2018

NEWS

Plugging China’s protection gap

As the level of prosperity rises in China, so In 2011, for the first time in the more likely to increase in many parts of too does the concentration of values in its country’s history, there were more the western Northern Pacific. conurbations. Without greater insurance Chinese living in cities than in the Resilience and insurance are penetration, there is a danger that the countryside, and according to forecasts increasingly important. Following the financial burden of natural catastrophes from the United Nations, the proportion flooding disaster in 1998, the government could impede economic and social is set to increase to 80% by 2050. The invested billions of dollars in an extensive development, according to a research note strong growth in the conurbations, programme that included both dykes and from Munich Re, written by Christoph particularly in highly exposed regions, flood warning systems. The measures Hoch, chief executive for Greater China. leads to higher and higher concentrations have proved effective: despite a higher The current year’s typhoon season shows of values. concentration of values, the impact of how important loss-avoidance measures the annual floods is declining. The new are: by the end of August, 21 tropical “Too little attention has strategy also looks to manage flooding cyclones had formed in the north-western been given to prevention and reduce the risk, rather than trying to Pacific, a substantially higher number than against local torrential achieve the best possible protection. the long-term average. Ten of these storms rainfall, as the events However, too little attention has reached typhoon strength – also more been given to prevention against local than usual. Nine tropical cyclones made of the summer of 2016 torrential rainfall, as the events of the landfall in China, one as a Category 2 illustrated.” summer of 2016 illustrated, Hoch writes. typhoon with wind speeds of up to Christoph Hoch, Munich Re 150 km/h. In August, Typhoon Rumbia Great potential for insurers hit the Greater Shanghai area directly as Although the government has been a tropical storm, bringing with it extreme On top of which, based on research campaigning for years for greater precipitation. Despite relatively low wind findings, the exposure of China’s east insurance take-up, insurance protection speeds, tens of thousands of buildings coast to typhoons has increased because against natural disasters in general, and were damaged or destroyed. the tracks of the storms have slightly against tropical cyclones in particular, The growing exposure to tropical shifted to the north. Scientists expect the is low. A penetration of just 1.3% in cyclones, which can occur between June future number of tropical cyclones in terms of the gross domestic product puts and November along virtually the entire the western Northern Pacific to reduce China on the same level as emerging south-east coast, is not yet sufficiently as a result of climate change, Hoch says. countries in Asia, at 1.2% on average, anchored in public consciousness, Hoch However, their projections indicate that but well below the level of the world’s says. Of the total losses of $630bn caused the number of very severe storms are industrialised markets. In China just by natural disasters in China between one tenth of property/casualty insurance 1980 and 2017, $126bn – one dollar premiums are derived from property in five – was attributable to tropical insurance, while motor vehicle insurance cyclones. This equates to every seventh accounts for a much larger share. disaster in terms of the number of events. The main reason for the low insurance Typhoon Fitow, which swept along penetration rate is a lack of risk awareness. China’s east coast in October 2013, ranks Plus, most people rely on the government among the country’s 10 costliest natural to help them in emergencies. However, disasters of the last decade, with overall initial efforts are being made in China to losses of $8bn. strengthen local resilience. This involves Fitow illustrated a fundamental problem, local authorities acquiring insurance Hoch believes. Of the overall losses, protection on behalf of their citizens, only around $700m (9%) was insured. which should at least compensate for a The gap was even worse in the period portion of the losses following a disaster. between 1980 and 2017, when just 4.4% Thus far, however, there has been very on average of the losses from tropical little acceptance that this type of insurance cyclones was insured. The is good for everyone involved. This situation is compounded by could be remedied by lobbying, in the fact that the loss potential conjunction with providing has risen dramatically, and information about the is continuing to rise, due to conditions under which the rapid increase in values insurance solutions are in an emerging country like actually possible, Hoch China. believes. l

10 | www.reactionsnet.com RENDEZ-VOUS REPORTER: MONDAY SEPTEMBER 10 2018 Your trusted reinsurance partner A strategy of client focus

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NEWS

Reinsurers need to focus on bottom line

AM Best is maintaining its outlooks The 2017 year showed many problems looking to use capital more efficiently for the reinsurance market segment related to the natural catastrophes and ceasing to underwrite or sell under- at negative. and this has created unexpected performing – albeit not necessarily The agency says it expects overall complications, but AM Best stressed unprofitable – classes. market conditions to remain very that whilst the global economy and For some insurers, merger and competitive over the near term, and insurance market have issues relating to acquisition (M&A) activity represents that despite negative market pressures, sluggishness and performance, the fiscal a means of optimising their portfolios it anticipates that the majority of state of most insurers is healthy. and they are examining purchases where reinsurers’ ratings will be reaffirmed The AM Best special report, titled they can attain greater market presence with stable outlooks. This is due to the “European insurers’ focus on profitability and scale. strong – and even very strong, it stresses overrides desire to grow top-line”, Robert DeRose, senior director, listed to add – balance sheet assessments and noted that growth remained important US job growth as a key aspect of the positive operating performance over last to European insurers, although their market that pointed to a healthy market, 12 months. primary focus tends to be on delivering but one that could also bring challenges Echoing thoughts made by Swiss Re’s returns to their shareholders and from unexpected quarters. Sigma report released at the Monte attracting good quality business. “US employment and wage inflation Carlo Rendez-Vous on Saturday about Because of this focus, it says, companies are an exciting development,” he said. returns on equity (ROE) and profitability, are increasingly concentrating on high “The world’s GDP is going along at a AM Best said these issues need to be margin lines and cost efficiencies in order pretty stable rate,” he added, and intoned addressed. The agency warned European to meet ROE targets. that this showed the speedy cycles of the reinsurers that they must increase At its Sunday morning press briefing, economic markets were adding to this, their profitability if they hope to be as AM Best also noted that insurers are and that it brought both positive and competitive as other markets. “closely examining their portfolios”, negative attributes. l PERILS profile set to grow, says Hitz

PERILS, the independent loss data to provide more insured event loss and reporting agency, is approaching its tenth exposure data in SE Asian countries,” anniversary and its profile in the industry he says. is growing, according to CEO Luzi Hitz, Hitz says that PERILS won’t always speaking to Reactions at the Monte Carlo be restricted to nat cat insurance and Rendez-Vous. hints that other lines of business could “Losses remain losses,” Hitz says, “but be added – such as cyber, which has a demand for our services has increased in significant accumulation loss risk. the 10 years since we founded”. PERILS announced this week that it PERILS was set up by the CRO Risk has taken over the management of the Forum in 2009 to aggregate and provide CRESTA Secretariat. CRESTA is the industry-wide catastrophe insurance data. globally accepted catastrophe insurance The service covers Europe, Australia, data standard that is applied throughout Turkey and Canada but there are calls the insurance and reinsurance industries for PERILS to expand further into other Luzi Hitz in more than 130 countries. regions, Hitz acknowledges. Founded in 1977, the Secretariat was “We’re working on it but we can only previously managed on a rotational provide reliable event loss data and above 65% but it currently does not have basis by Munich Re and Swiss Re, who exposure data if we have enough support coverage in the US and in Japan. will remain involved as members of the in the given market from primary Growing concern over the stubbornly CRESTA advisory board. insurers that provide the data,” he wide protection gap in emerging markets “We’ll work to make sure that CRESTA explains. “Our task is to convince primary has led Hitz to look beyond the larger stays relevant and we won’t keep changing carriers to agree to provide the data. That mature insurance markets. the standard. But we expect to engage can take a while.” “We are working on it and we have more than has been done in the past with Data from over 100 companies gives a joint project with the Nanyang the industry, especially the brokers and PERILS an overall market coverage of Technological University in Singapore modellers,” Hitz says. l

RENDEZ-VOUS REPORTER: MONDAY SEPTEMBER 10 2018 www.reactionsnet.com | 13 NEWS

Guy Carp fires a warning shot at MGAs

“Multiple” pressures could stymie further the chain, ramping up the potential for under greater scrutiny and alternative growth in the MGA sector unless MGAs human error, reducing speed to market remuneration structures are being can improve the value they bring to and adding unnecessary cost.” put in place.” capacity providers, according to Vicky “It’s not just about a first-rate business Carter highlighted the ability of MGAs Carter, vice chairman Global Strategic value proposition, but also providing to be more versatile and flexible than Advisory, at Guy Carpenter. the most efficient distribution channel large carriers: “They offer the perfect In a note timed to coincide with the possible,” she explained. “Fully automated vehicle for entrepreneurial underwriters Monte Carlo Rendez-Vous, Carter said systems, real-time data processing, instant and remove many of the restraints the MGA model has proven attractive as exposure reporting and the ability to imposed by bigger operations and can illustrated by the high prices achieved in make real-time rate adjustments – these also bring new products to market faster.” recent acquisitions. can reduce costs to as low as five percent, However, it’s not possible to operate a However, she warned: “Increasing having a positive impact on the bottom- relationship in which one party capitalises licensing and regulatory requirements, line and boosting carrier appeal.” more on the upswing while alongside conduct risk requirements, MGA cost factors bring into the the other shoulders any are challenging to the MGA model and frame the sustainability of the downturn, she added. cost structure. Consequently, process commission structures upon “To create a fully efficiency is critical alongside high- which many are built, she said. functioning, value-add calibre underwriting. Carriers won’t foot “Current market pressures partnership, the MGA the bill for MGAs’ underperforming mean reinsurers are locked onto must be remunerated on infrastructures.” underwriting profit and managing profit – that’s essential to MGAs can produce a very strong pure down expenses,” said Carter, ensure both MGA and underwriting performance yet deliver “which extends to MGAs”. carrier objectives are insufficient margins to carriers, she “Commission-based successfully aligned. It said: “Too often this is because there relationships must be a symbiotic are multiple human touch-points in are coming relationship.” l M&A not always a financial godsend

sure-fire way to achieve the profits Holderness believes that this should be and growth that many hope for. more of a long term strategy rather than Konsta, a senior partner, and something that inject cash into a business Andrew Holderness, global head in the short term. The emerging markets of corporate insurance, at law firm in South East Asia, Africa, and even the Clyde & Co, know a lot about the sleeping giants like India and China, world of M&A having written will require a lot of work before they the contracts for numerous deals can properly deliver the returns that one over the years. would see in more mature markets. Holderness described M&A Holderness says that while many go as being on “an uptick”, with looking for M&A believing they can cut 186 deals being recorded in the costs on back office expenses through first half 2018, and that it can, ‘synergies’, it does not always work out of course, be a great way for as planned. “building up scale” and finding “Less than 50% of M&A deals and Andrew Holderness new global partners, but he business is actually achieving their goals,” warned that there can downsides he told Reactions. M&A may not be the financial godsend to such transactions. There are also signs that market may many think it is and should always be Many go into these deals thinking that not be as robust for M&A as many think looked into carefully. since the western markets are so saturated – they point to several Lloyd’s syndicates Mergers and acquisitions are happening there is little room for organic growth, that are up for sale, that a “couple of years at a rate not seen since the financial crash so they head to the emerging markets ago would have been flying off the shelf” of a decade ago, but Clyde & Co’s Simon looking for new customers and new but have now been looking for a buyer for Konsta warns these deals may not be the opportunities. several months, or even longer. l

14 | www.reactionsnet.com RENDEZ-VOUS REPORTER: MONDAY SEPTEMBER 10 2018

AON

The future is green for ILS Insurance-linked securities have proved their reliability in property cat business. But social impact transactions such as the recent World Bank catastrophe bond are starting to attract the attention of ‘green funds’, according to Paul Schultz, CEO of Aon Securities.

After the heavy cat losses of grounded in property because Aon Securities recently last year doubts were being short duration risk supported by structured a record-breaking expressed over the continuing third party models is the most earthquake cat bond for commitment of ILS investors. attractive class. But there are the World Bank: why is it Did ILS pass the test? “adjacencies” to that: the Federal significant? The ILS model worked as Emergency Management Agency There was significance in the advertised – it even exceeded (FEMA) recently completed a fact that four nations united expectations. The investment transaction for the National Flood for a single issuance, and also managers and the ultimate capital Insurance Program (NFIP) in in the size of the transaction. providers were kept up to date the US, for example. That kind of The bond offered $1.36bn of on unfolding loss development transaction will add to ILS growth. capital markets protection to the throughout hurricanes Harvey, Eventually, I expect to see cyber Pacific Alliance countries (Chile, Irma, and Maria, and at the point and terrorism risk perils being Colombia, Mexico and Peru), and when claims had to be paid, it brought to market and tested on a so immediately became the largest was a very orderly process. It standalone basis. This will require a earthquake catastrophe bond ever, gave clients and capital providers different model approach, but there as well as the largest ILS sovereign the confidence to trade forward. is a basis for analysing the threat risk transfer, and the second largest Capital providers were happy to in both cases. That’s the key to catastrophe bond in history. reload and even increase their securitising these risks effectively. Importantly, the World Bank allocations. So if anything, the invested the proceeds of the bond ILS market came out of 2017 in Do you see scope for third party into sustainable programmes a stronger position than when it capital investors linking up with within the Pacific Alliance. So went into it. primary market carriers? beyond the immediate financial The easiest entry point has been protection the bond had a big Will alternative capital continue reinsurance because it represents social and economic impact in the to increase in 2018? larger transactions and bulkier region that was effectively funded The first quarter of 2018 was premium. But some ILS managers by the ILS market. marked by record issuance are getting closer to the original In this way, it has been a volumes, new entrants to the risk by developing relationships particularly rewarding experience market, and good support from with distribution channels such as for us because usually we focus investors. The first quarter total MGAs. It is a natural progression only on the financial aspect of $3.58bn of catastrophe bonds that will happen over time. of transactions; here we have placed represented the highest ever The industry is moving towards a connected catastrophe bonds with first quarter issuance tally, and far much more converged model than genuine social benefit. exceeded the 2016 and 2017 first has ever been seen in the past. quarter issuance volumes, which ILS managers are creating rated Has the World Bank transaction were each around $2.2bn. affiliates, and rated underwriters increased investor interest The second quarter was also are creating off-balance sheet third in ILS? strong, and this trend has continued party capital vehicles. Yes, transactions such as this one, into the third quarter, so 2018 is A client-based solution model which have a demonstrable level shaping up to be a very positive is evolving that sources the most of social impact, are beginning year. At Aon we’re seeing good efficient capital, irrespective of to attract the attention of client support in terms of ceding its form. It’s not easy to achieve, “green funds”. Such funds invest to the ILS market, and healthy but this model will create big only in asset classes linked to investment support in terms of opportunities for those in the sustainable or socially conscious investors subscribing to the deals. value chain who get it right. endeavours. This opens the door There’s going to be ample capital to more capital and investment It is possible that investors will in the market, and those in the ILS space, and will help look to push further into non- who can provide us to increase the growth and cat reinsurance business? the greatest value momentum that we have The market is going to stay will succeed. already achieved. l

16 | www.reactionsnet.com RENDEZ-VOUS REPORTER: MONDAY SEPTEMBER 10 2018 Value being treated as an individual? The feeling’s mutual.

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Insurtech teams up with agri businesses

Agriculture and insurtech may seem like a mismatch, but cutting-edge technology has long been a part of a farmer’s arsenal, and the insurance industry is looking to piggyback off that technology to sow new opportunities. “In general there’s been a real surge of agricultural technology in the past eight to 10 years. I wouldn’t say that most of the tech investment is insurance-focused, but we are discovering that it can be applicable,” said Brian Young, chief executive of Crop Risk Services or CRS as it is also known. His firm has made strides on the technology side of agricultural insurance via the use of drones, and data analytics provide by existing equipment. According to Young, his firm currently has the largest drone fleet of any crop understanding of farmers and their needs, “Paraguay is interesting for two main insurer. The business began building its as well as the complexities of the federal reasons. There are very high transaction drone fleet back in 2014. crop insurance program, and wrap that costs. The farms are very remote and “The technology behind drones has around the technology, and I doubt that it can take a long time to get there, become much cheaper, and so we saw will happen anytime soon,” Young said. and the inspectors can be unreliable so that and the value we could get from Outside of the US, crop insurance is big information can be lost. So we are directly it. Just a while back we had a loss in business as well, with India and China collecting information from the field and Arkansas, and the feedback we got from notable for their positions as the second transmitting it to a central system, which a couple of our adjusters utilising drones and third largest crop markets. is very valuable,” he said. was very positive. Latin America has shown considerable “The second reason we chose Paraguay, “They were able to analyse 1,700 acres of promise as an incubator for crop-related was because it gave us a chance to explore corn in 12 hours. They thought it would technologies as well. this product on a national scale, and take multiple days, and it ended up being In Latin America, rates of crop Paraguay is a large country that still a win-win situation for both us and the insurance subsidisation vary wild by has significant maize and soybean crop customer,” Young said. country, if it is even subsidised at all. production, which made it interesting for In addition to drones, farm equipment AgriTask’s recent partnership us to launch the project there.” itself can be utilised to gather data on with Mapfre is an example of new “In terms of government subsidies, losses and habits of the customers that developments in the agritech space, Paraguay has a very limited government CRS covers. as well as the adoption of existing support for insurance. They only provide “Precision agriculture is one avenue that technologies by insurers in order subsidies for very small subsistence CRS has been working on for the past two to further their data and analytics farmers. This makes it, along with years,” Young told Reactions. capabilities. Argentina two of the strongest examples “It is the idea that we can gather data AgriTask, which was not conceived for the commercial agricultural insurance from farm machinery and use it to with insurance in mind, partnered with market,” he added. streamline our process. We partnered Mapfre in order to deliver a digital “But in our project, we don’t deal with with a company called TruAcre in order claims management system, with its pilot any governmental scheme at all.” to make that happen,” he added. operation launched in Paraguay. According to Panchaud, it made the Agricultural insurance is also the “You create the workflows they need, you most sense to launch in Latin America, one area where insurers are not overly get the information they need, and you but he noted that his firm was definitely concerned about smaller startups integrate the information they need, so looking into bringing a version of their disputing their business, mainly due why wouldn’t you speak to an insurance product to the US and Europe. to the heavily regulated nature of crop provider? So we reached out to Mapfre, AgriTask is based in Israel, and is insurance in the US, and the extensive which is the largest insurance provider for mainly a service provider for a number of knowledge of the crop market that most agricultural insurance in Latin America,” different firms in the agricultural sector, smaller players simply do not possess. said Roderick Panchaud, business with insurance serving as its latest foray “Disruptors would have to match our development manager at AgriTask. in the space. l

RENDEZ-VOUS REPORTER: MONDAY SEPTEMBER 10 2018 www.reactionsnet.com | 19 NEWS

Europe swells, Bermuda sinks

Europe’s reinsurance industry is normalised combined ratio of 98.8% for become apparent, says Fitch Ratings’ performing smoothly, but there are H1 2018, with an average reported rate for report. Bermuda’s underwriting indications the situation in Bermuda is the period at 93.9%. A big improvement performance in 2017, minus the impact of not as buoyant, a new report from Fitch on 2017’s 100.7% normalised average, and last year’s natural catastrophes, improved Ratings suggests. a 107.3% reported average. very slightly, says Coutts, with a 5.8% Graham Coutts, Fitch Ratings director There have also been no major annualised rate of return recorded during for European reinsurance, says that movement in rates, Coutts explains. the first half of 2018. the European reinsurance industry has “A high level of normalised combined The rate of return had previously been lots to be happy about, as the natural ratio shows deterioration of the market,” as high as 10% to 15%, but, he says, catastrophes from 2017 have not caused says Coutts, and that its relative calm down the industry may now be seeing a “new any lasting problems. after 2017’s catastrophe losses shows a normal” where ROEs are lower. The ‘big four’ European reinsurers – healthy market where companies have made “Bermuda is less attractive,” Coutts Munich Re, Swiss Re, Hannover Re and good choices on risk, though obviously this says, especially with recent tax changes SCOR – all had healthy first halves of 2018. changes from company to company. by Donald Trump’s administration in the Munich Re, for example, posted €15.1bn There is also, he says, no big appetite US meaning more companies are keeping of gross premiums written during the for retrocession, and Harish Gohli, Fitch’s their capital in North America. first half of 2018, down €591m on the managing director for insurance teams, Despite all this, no immediate action is prior year period. Property and casualty says that area “shows that this strong planned on Bermudian companies by the reinsurance accounted for €9.9bn of capital explains the stable outlook”, by ratings agency. However, they emphasise the €15.1bn total. The first half of 2017 companies having the resources to fall that HIM has changed business models. saw Munich Re generate €8.8bn of P&C back on in times of need. He does give some hope: small and mid- reinsurance gross premiums written. The eroding of profit margins in sized reinsurers can still survive, “but it’ll On average, the market posted a Bermuda-domiciled re/insurers is has be tough”. l

20 | www.reactionsnet.com RENDEZ-VOUS REPORTER: MONDAY SEPTEMBER 10 2018 WILMINGTON TRUST RENOWNED EXPERIENCE | INSURANCE COLLATERAL

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MONTE CARLO | CMYK | TRIM: 210 mm X 297 mm CCR RE

Montador meets Reactions Part one of a Q&A with Laurent Montador, Deputy Chief Executive at CCR Group.

What are the main challenges facing net accumulations and the allocation prompting insurers to reconsider their the reinsurance market today? of capital is also important. Finally, asset allocation. There are two trends: We feel there are three: companies must have a global view of the insurers and assets managers supporting • Generating a proper return for balance sheet with active management on sectors that favour decarbonisation of the shareholders. We are faced with more the asset side of the balance sheet and not economy such as the renewable energy and more complex interconnected risks. just on the liability side. sector; and on the other, the finance With more sophisticated analytical Of course, companies must also meet sector seeks to reduce investments tools, we can better interpret modelled the expectations of their partners and in fossil fuels such as coal to reduce results. Having a view on what is poorly clients by being innovative and solutions- greenhouse emissions. modelled is also very important. I would minded to face the fast-changing world Insurers are also active in the green bond like more tools to incorporate AI as with new risks and uncertainties in what market, but we are collectively limited in augmented intelligence will help us to remains a competitive environment. our reporting capabilities due to a lack of adopt quicker views of risk pricing. The Companies can increase their efficiency data and methodology to measure this markets at the moment do not react so by lean management, improved processes aspect of the companies we invest in. quickly with the current flow of capital and cost-cutting during times of depressed We apply ESG criteria to our investment and the intermixing of different risk margins. They must also increase and strategy, but it is also important in transfer techniques and industry fields. diversify their book while optimising the our underwriting. We have declined • Climate change is another great relative ratio of capital needed. underwriting risks we felt were outside challenge, but also an opportunity the scope of our ESG policy. for reinsurers. The volatility already Disruption, usually in the context observed reinforces the need of of technology, is a big topic for re/ Can the re/insurance industry protection for insurers, as well as the insurance leaders. What do you do more than ‘greening’ their importance of having coverage available regard as the most disruptive threat investment policies to promote to people, businesses and governments. or opportunity facing the industry? sustainability among clients? • The digitalisation of our societies will For years, Google, Amazon, Facebook, The underwriting philosophy can support allow us to measure and assess with Apple (GAFA), Baidu, Alibaba, Tencent the green energy industry by helping it greater precision. I strongly believe and Xiaomi (BATX) have had the grow and replace fossil fuels. Regulation this will help us to better mitigate risk technical and financial means to enter can also help through lower capital and avoid a large proportion of claims the insurance, reinsurance and financial charges for green investments. through prevention. We need to offer markets with tools and methods we are As a natural disaster reinsurer, the service of mitigation and prevention beginning to use, and with data we are CCR’s work involves risk prevention to our clients. For cyber risks, there authorised to use. development and we share our research is obviously a need for cover. Risk Internet-based businesses must adhere with the general public, municipalities awareness has increased dramatically to the same rules and regulations if they and insurers to improve their knowledge and the number of incidents being are to operate in a country’s insurance of these events. reported has also increased. But industry, even if the product they are CCR Group has sponsored Energy accumulation and cyber event selling is not being marketed as insurance. Observer, the first self-sufficient sea-going definitions are a challenge as there is not Partnerships between the GAFA and vessel with zero greenhouse gas and a common approach from the industry. BATX are of course possible and fine particle emissions. We also have a preferable, and I favour a collaborative partnership with Carbone4, a consulting What are the key ingredients for approach between partners who firm specialised in energy transition success in today’s reinsurance recognise that clients are not and climate change adaptation. market? owned, but served. The aim of the partnership was The three main contributors to success to co-finance, over 2017, the are being agile to industry changes, active CCR has incorporated development of the Climate risk management and having a global environmental, social Risk & Impact Screening balance sheet. and governance (ESG) (CRIS) project – an innovative You must adapt to the changes taking criteria into its investment method and management tool for place in the industry globally with respect strategy. Do you believe the assessing the level of exposure to the individual markets, their respective wider industry is doing of financial investment regulations and compliance. Actively risk enough in this area to portfolios to the managing the business with a proper make a difference? physical risks of understanding and control of gross and Climate change is climate change. l See tomorrow’s RV Reporter for part two… 22 | www.reactionsnet.com RENDEZ-VOUS REPORTER: MONDAY SEPTEMBER 10 2018 STORY BUILDING - CREDIT PHOTO : GERALDINE ARESTEANU BUILDING - CREDIT PHOTO STORY

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RV 25th Anniversary.indd 1 23/08/2018 16:15 NEWS

Supporting adaptation in turbulent times

Xceedance is helping re/insurers respond underwriting, distribution, policy service, to the turbulence impacting the industry and claims – to establish processes for with its Adaptive Target Operating Models. operational advancement.” Digital disruption, significant catastrophic At the same time, adaptive models allow losses, increasingly stringent regulatory for deep examination of specific re/insurer guidelines and margin pressures are operational areas to uncover hidden issues. pushing re/insurers to re-examine their For example, if loss ratios are low, there operational processes and accelerate the could be a multitude of considerations – adoption of intelligent technologies. such as disjointed risk assessment, process That is the opinion of global consultancy inefficiencies, or pricing fundamentals – and insurance managed services firm, masked below the surface. Xceedance, which recently introduced its Xceedance also leverages the models new Adaptive Target Operating Models to and an industry-expert consulting the industry. practice to deliver tailored, strategic As Sachin Kulkarni, Xceedance senior operations support across the insurance vice president of consulting services, “Anticipating rapid business lifecycle. Such an approach explained to Reactions, Adaptive Target change and utilising our can help re/insurers boost intelligent Operating Models support operational adaptive models and technology adoption, control operating transformation and process optimisation, expenditures, and drive profitability. in large part through the application of domain expertise allow rigorous, dynamic benchmarking and re/insurance companies Change management individualised operational analytics. to take the initiative in In providing Adaptive Target Operating This novel approach to target operating managing both evolving Models, Kulkarni believes strong models, Kulkarni explained, will help re/ market conditions and communication is a pre-requisite for insurers better address the onslaught of regulatory requirements.” constructively adapting to change. industry changes. “When a new operational model Sachin Kulkarni, Xceedance is being implemented, all facets and Strategy blueprint benefits of the impending change must “Anticipating rapid change and utilising then tackle them appropriately and be communicated in a streamlined our adaptive models and domain meticulously. and disciplined manner. Xceedance expertise allow re/insurance companies Even though they operate in the same is experienced in, and sensitive to, to take the initiative in managing industry segment, many companies will the impacts of insurance change both evolving market conditions and not be suffering from similar issues. management, which need to be regulatory requirements,” said Kulkarni. The Xceedance method of operational acknowledged at every level of re/insurer Adaptive Target Operating Models measurement and review provides organisations. Managing the expectations provide highly customisable blueprints visibility for re/insurers to determine the of operational transformation greatly for clearly defining “desired states”, and scope and scale of necessary business helps to ensure seamless and productive help re/insurers positively react and and process modifications. And Adaptive execution,” according to Kulkarni. respond to industry fluctuations. Target Operating Models can offer “We assist companies to smoothly and strategic guidance to better focus on the Defined outcomes effectively expand day-to-day operations right levels and types of alterations. Embracing a scientific methodology is and enrich business performance,” stated essential to making a successful transition Kulkarni. Execution from the current as-is state to a desired An adaptive, nuanced operational future state of insurance operations. Personalised approach benchmarking and evaluation framework “When the to-be state is well defined Other challenges facing the global allows re/insurers and Xceedance to and substantiated by analogous industry insurance industry include new market proficiently assess and identify key areas standards and performance metrics, re/ entrants, mergers and acquisitions, as of improvement and realignment. insurers can expect faster, measurable well as technological shifts that can “Analytically structured, peer-driven results and more concentrated ROI. impact competitive differentiation. Those benchmarks are essential for re/insurers The Xceedance adaptive models create factors and more are also considered by looking to enhance operations,” noted significant business value exactly because Xceedance, the company explained. Kulkarni, before adding: “Xceedance the methodology is actively validated by In fact, a core strategy of the can help by holistically looking at the peer-level benchmarks, then carefully personalised models is to identify unique value chain of individual re/insurers calibrated for each re/insurer’s desired state obstacles or distinctive opportunities, and drilling down on areas such as of insurance operations,” said Kulkarni. l

RENDEZ-VOUS REPORTER: MONDAY SEPTEMBER 10 2018 www.reactionsnet.com | 25

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Michael Consedine, Eduardo Fábrega, Chief Franz-Josef Hahn, Chief Andrew Horton, Chief Chief Executive; Executive; ASSA Executive; Peak Re Executive; Beazley National Association of Insurance Commissioners

eactions has created an editorial board to insider’s insight with what the true talking points help inform and direct our editorial policy. within the industry are. RThe board consists of some of the most The Editorial Board would also help to direct the senior figures from the global re/insurance market tone and publishing policy of the magazine. The who will provide us with insight and guidance on board’s members will provide a sounding board the biggest topics impacting the industry. when new ideas for the publication are put forward. These individuals work for insurance and Furthermore, the executives that sit on the reinsurance underwriters, third party capital Reactions’ Editorial Board will provide feedback managers, brokers, industry bodies and a variety on the articles and wider coverage we generate Corneille Karekezi, Steven Levy, Howard Mills, Global Mike Morrissey, of service providers. It consists of members based so that we can gain better insights into what it is Group Managing President and CEO – Insurance Regulatory President and Chief around the globe in re/insurance industry centres our readers want. These discussions will also help Director and Chief Reinsurance; Munich Leader; Deloitte Executive; International such as London, New York and Bermuda. influence what we offer our subscribers in the Executive, Africa Re Re America Insurance Society Reactions’ editorial team regularly speaks future. with many of the leading figures in the global We are pleased to present the current make- re/insurance industry to hear their thoughts on up of our Editorial Board. This group of senior the major issues and topics affecting the market. industry executives from around the world includes These conversations form the basis of many of the the leading figures from some of the biggest interviews and features we publish online and in re/insurance businesses in existence. print, but they also help to inform us of issues and The group is not complete however, and we are themes that may be of interest to future articles. striving to make sure that our Editorial Board But we wanted to formalise that entire process better reflects the diverse nature of the vibrant through the creation of the Reactions Editorial industry that Reactions reports on. As such, you Board. The board will provide a valuable industry will see this group evolve in the coming months. Frank Nutter, President; Maamoun Rajeh, Benedict Reid, Associate Stephan Ruoff, Chief Reinsurance Association Chairman and Chief Partner; EY Executive and Head of America Executive; Arch Re of Europe; Tokio Millennium Re

Dominic Addesso, Pina Albo, Chief Grahame Chilton, Dominic Christian, President and Chief Executive; Hamilton Chairman; Capsicum Re Executive Chairman; Executive; Everest Re Insurance Group Aon Benfield David Sampson, Brandon Sweitzer, Mark Watson, President Karen White, Chief International and Chief President and Chief Dean; St John’s School and Chief Executive, Executive, RMS Executive; Aon UK Executive; Property of Risk Management, Argo Group Casualty Insurers Insurance and Association of America Actuarial Science

28 | www.reactionsnet.com RENDEZ-VOUS REPORTER: MONDAY SEPTEMBER 10 2018 NEWS

Michael Consedine, Eduardo Fábrega, Chief Franz-Josef Hahn, Chief Andrew Horton, Chief Chief Executive; Executive; ASSA Executive; Peak Re Executive; Beazley National Association of Insurance Commissioners eactions has created an editorial board to insider’s insight with what the true talking points help inform and direct our editorial policy. within the industry are. RThe board consists of some of the most The Editorial Board would also help to direct the senior figures from the global re/insurance market tone and publishing policy of the magazine. The who will provide us with insight and guidance on board’s members will provide a sounding board the biggest topics impacting the industry. when new ideas for the publication are put forward. These individuals work for insurance and Furthermore, the executives that sit on the reinsurance underwriters, third party capital Reactions’ Editorial Board will provide feedback managers, brokers, industry bodies and a variety on the articles and wider coverage we generate Corneille Karekezi, Steven Levy, Howard Mills, Global Mike Morrissey, of service providers. It consists of members based so that we can gain better insights into what it is Group Managing President and CEO – Insurance Regulatory President and Chief around the globe in re/insurance industry centres our readers want. These discussions will also help Director and Chief Reinsurance; Munich Leader; Deloitte Executive; International such as London, New York and Bermuda. influence what we offer our subscribers in the Executive, Africa Re Re America Insurance Society Reactions’ editorial team regularly speaks future. with many of the leading figures in the global We are pleased to present the current make- re/insurance industry to hear their thoughts on up of our Editorial Board. This group of senior the major issues and topics affecting the market. industry executives from around the world includes These conversations form the basis of many of the the leading figures from some of the biggest interviews and features we publish online and in re/insurance businesses in existence. print, but they also help to inform us of issues and The group is not complete however, and we are themes that may be of interest to future articles. striving to make sure that our Editorial Board But we wanted to formalise that entire process better reflects the diverse nature of the vibrant through the creation of the Reactions Editorial industry that Reactions reports on. As such, you Board. The board will provide a valuable industry will see this group evolve in the coming months. Frank Nutter, President; Maamoun Rajeh, Benedict Reid, Associate Stephan Ruoff, Chief Reinsurance Association Chairman and Chief Partner; EY Executive and Head of America Executive; Arch Re of Europe; Tokio Millennium Re

Dominic Addesso, Pina Albo, Chief Grahame Chilton, Dominic Christian, President and Chief Executive; Hamilton Chairman; Capsicum Re Executive Chairman; Executive; Everest Re Insurance Group Aon Benfield David Sampson, Brandon Sweitzer, Mark Watson, President Karen White, Chief International and Chief President and Chief Dean; St John’s School and Chief Executive, Executive, RMS Executive; Aon UK Executive; Property of Risk Management, Argo Group Casualty Insurers Insurance and Association of America Actuarial Science

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