The insurance cycle as an entrepreneurial challenge
The fact that insurance buyers, cedents, reinsurers and industrial lines insurers have to live with fluctuating market prices does not mean that the individual company has to sit out the cycle compliantly. There are supply-side strategies which ensure better results over the cycle than by passively standing by and allowing the cycle to take its course.
Non-life insurance typically goes through price cycles that extend over several years, and insurers are currently experiencing an upswing in rates following a deep and protracted price trough. These price swings trigger extreme fluctuations in revenue and expenditure for reinsurers especially, but for also cedents and non-insurance clients. For them, these fluctuations are detrimental in two ways: they make it difficult to plan ahead for revenues and expenditure, and they increase the cost of capital to the company. While it would appear desirable to eliminate these fluctuations altogether, there are no fundamental changes discernible in the market that would indicate that such a structural improvement is on its way. However, there are supply-side strategies with which better results can be achieved over the cycle.
Intended for a broad internal readership, "The insurance cycle as an entrepreneurial challenge" focuses on these strategies, pointing to the difficulties they have to overcome. First, diagnosis requires a future-oriented market analysis to recognise prices in good time to steer capacity. Second, strict business control and incentive structures geared towards profitability are also essential. The new publication rounds out its study of the cycle with insights into higher profits through adjusting market shares and an overall assessment of cycle management.
