Insight and Intelligence on the European and International (Re)insurance Markets 21 OCTOBER 2019 MONDAY BADEN-BADEN Adapt to Industry 4.0 or face irrelevance, say industry leaders he (re)insurance industry must (re)insurance market was “complacent” our way into oblivion”. Tevolve quickly to address the client about the changes ahead. The RenRe executive pointed to the needs and challenges which come with “We have a short term-driven market experience of other industries like the fourth industrial revolution or face which creates incentives not to look at publishing, where innovation came from irrelevance, industry leaders warned the long term,” he said. “But if we are newcomers to the space. “It’s rarely the at the Guy Carpenter Baden-Baden not prepared we are going to miss [the case that the existing executive team can Reinsurance Symposium yesterday. opportunity].” lead innovation,” he said. “You have to get Speaking during a panel discussion, RMS In an earlier keynote speech, Lloyd’s the majority of them out of the way from CEO Karen White cautioned that if firms did performance management director Jon executing the day-to-day, and then a side not adapt their model to a new, data-driven Hancock said the scale of the challenge group needs to lead that innovation.” and technologically efficient age then their ahead for the (re)insurance industry was Guy Carpenter international CEO James business was at risk. “enormous” because to date it had never Nash noted that a major theme throughout “The next five years matter more than really embraced technology in the way it the whole discussion at the Symposium was most realise,” she said. should have. the need for industry collaboration in order Panellists noted that there was great “This is a massive opportunity to just for it to prepare itself for Industry 4.0. opportunity to be had from so-called leapfrog the third industrial revolution and “The battleground is not necessarily on Industry 4.0 through providing solutions get ahead of the game by really embracing the front end – the battleground for each for new technologically driven risks and the fourth,” he said. constituent is how to add value,” he said. “It’s insuring intangible assets. However, they RenaissanceRe chief risk officer Ian not just about the transaction of risks, we all warned that the industry must be proactive Branagan also noted the industry’s slowness need to play our part in reducing frictional in addressing this challenge. to adapt to new client demands in the past, costs, and all of us need to be focused on Laurent Rousseau, deputy CEO of and warned that the sector must embrace finding ways to get capital to risk in a more Scor Global P&C, said a big part of the the new pace of change and not “decline efficient manner.” 03 Mapfre Re drops London 05 European reinsurer 08 Interview: Swiss Re’s facultative business Q3 results preview Urs Baertschi INSIDE 04 Swiss Re exits Italian 06 InsurTech market 13 Big questions: crop-hail QS market matures in Europe Market conditions Turning Risk Into Success 1_Monday cover.indd 1 20/10/2019 18:46 RR_InsInsiderAD_BadenDallies_Sept19Partner279x215.inddBaden-Baden 2019 Day 2.indb 2 1 09/09/201920/10/2019 4:25 15:43 PM COMMENT Beware complacency perhaps unique characteristic of the flat renewal for European wind – and 2019/20 underwriting year is going to be AEuropean windstorm market is that it another year below technical levels. another period in which reinsurers are in remarkably stubborn. Europe may be pretty siloed from the huge deficit. It pretty much refused to budge in the rest of the cat world, as a balancing peril The experience – particularly the Jebi wake of Hurricane Katrina and following the for reinsurers with big US wind bets, but it creep – has also laid bare that there is scope 2011 year of cats it was close to pancake would do well to take note of some of the for model miss, particularly when a long flat. This despite long-run fears that the parallels from recent events. period of low activity means they have not market is technically underpriced. There are lessons for writers of European been tested. And it looks as though again it will refuse windstorm to be taken from the recent This creates more room for shock losses to follow in the footsteps of the Floridian wind losses In Japan. to emerge. and Japanese markets, where underwriters For years in the run-up to Jebi, have said enough is enough after elevated Europe may be pretty underwriters complained that Japanese claims activity and shock losses. “ windstorm was priced below technical Higher retro costs, which started to much siloed from the rest of levels, but for the most part they stuck make themselves felt in a big way at the cat world, as a balancing in and left themselves exposed to a 1 January, did not make much of an peril for reinsurers with big punishing series of losses. impression on pricing at the beginning What’s worse is that underwriters of this year, and once more there is US wind bets, but it would continued to write the risk even as the scepticism that they will make much of do well to take note of some models warned about thin returns, a difference come 1 January. of the parallels from recent only to find the models had woefully Reinsurers and brokers themselves events underestimated the losses. describe the market as boring – or stable if ” There is a parallel to be drawn here with they feeling diplomatic. European windstorm, and the market A prolonged period of benign windstorm After 25 years of pretty benign typhoon should take note. losses in Europe has allowed this state of activity – which broadly led to softening Writing major cat-exposed books based affairs to drag on longer than many feel it – Japan has been hit by four meaningful on a look at the recent loss record, even should have. landfalling storms in less than two years. as the models point to pricing inadequacy, The European wind market has not seen Typhoon Jebi, which struck last year, is a risky bet and one that has recently a major windstorm loss since Kyrill in 2007, made itself felt for much longer than was gone very badly wrong in the international and losses from other cat events have been welcome. cat market. limited. Market loss estimates seem to have And even though global reinsurers may settled at around the $15bn mark, but be hurting elsewhere, European cedants this is several times the size of initial see little reason why they should pay more estimates of $2.3bn-$4.5bn from AIR to compensate reinsurers for a hurricane in and $5.5bn from RMS. Catrin Shi, Florida or a typhoon in Japan. The outcomes of Faxai and Hagibis for Acting Managing Editor, The Insurance Insider As a result, the early indications for the reinsurance market are less certain but 1 January are that we will see yet another the damage wrought is extensive, and the [email protected] Mapfre Re exits London fac market apfre Re has ceased underwriting was EUR4.2bn ($5.4bn) in 2018. “improve the service it delivers to its Mfacultative business in London At a group level, facultative business clients, and further develop its presence following a review of the profitability and made up 31 percent of Mapfre Re’s in the market”. strategic fit of the portfolio, The Insurance gross written premiums according to It added that it would still service Insider can reveal. its latest financial statement, with most international clients in the London market Sources told this publication that Mapfre coming from proportional reinsurance in specialty insurance lines such as aviation, Re’s London facultative portfolio included business at 71 percent, and the remaining aerospace and oil and gas. power, renewable energy and property 9 percent coming from non-proportional The exit comes after the reinsurer lines. reinsurance. restructured its specialty commercial unit A portion of the portfolio is housed in its In a statement to this publication the last year, closing the German branch of its global risks arm, which was folded in to reinsurer reiterated its commitment to the global risks arm and folding its UK, French Mapfre Re’s global facultative portfolio last treaty reinsurance market in the UK, adding and Italian branches into Mapfre Re. year as part of a restructure. that it was a “key pillar in the company’s This effectively made Mapfre Global The London portfolio of facultative international strategy”. Risks an MGA, writing insurance on Mapfre business made up around 1 percent of It added that the exit would “help Mapfre Spain paper and reinsurance through Mapfre Re’s overall premium volume, which Re optimise its financial efficiency” and Mapfre Re. DAY 2: MONDAY 03 Baden-Baden 2019 Day 2.indb 3 20/10/2019 15:43 NEWS NEWS Industry leaders must drop proprietary attitudes to data he (re)insurance sector must embrace was at a “crossroads” and a point at which warehoused separately the industry would Ta more “open-source” and less the market was changing so rapidly that be unable to make progress. proprietary approach to the use of data, “the pain of staying the same is worse “We think if you lock up the data you are speakers at the Baden-Baden conference than the pain of changing” for carriers part of the problem.” have warned. and brokers alike. White stressed a difference between Speaking at the Guy Carpenter Baden- the proprietary data that (re)insurers and Baden Reinsurance Symposium on Sunday, We think if you lock up brokers hold and that which they could Lloyd’s performance management director the“ data you are part of share with fellow market participants for the Jon Hancock said the industry must “get greater good of the industry as a whole.