Reinsurers' increasing role in managing the way out of the crisis

Pierre Ozendo, CEO of Swiss Re Americas, presented on (Re)insurance strategies for success at the National Underwriter Executive Conference in New York City on November 12, 2009.

Pierre Ozendo's presentation provided an overview of the current state of the P&C insurance industry in the US, a review of the economic landscape over the past two years and warnings on trends that may impact the pricing and availability of reinsurance coverage. Mr. Ozendo also provided recommendations on how reinsurers can add value and serve the needs of clients in the current landscape. The presentation was followed by questions from the audience.

State of the P&C insurance industry

"Although balance sheet issues have eased,  limitations in access to new capital persist," Mr. Ozendo stated in describing the current situation in the industry.  He noted that the industry is in a phase of rapidly decreasing profitability due to continuing softening of rates and declining investment returns.  This means low growth, with underwriting and operational excellence remaining the keys to industry success.

"Commercial rate changes are moderating but competition is strong," Mr. Ozendo continued. Cash-flow underwriting persists.  Mr. Ozendo predicted that commercial lines primary premiums will stabilize, but the drag on profitability will continue through 2010.  The high cost of capital in the current environment and limited alternative capacity have allowed reinsurance to remain the most efficient source of capital available.

Reinsurers increasing role in managing the way out of the crisis

"Reinsurers have a key role play in managing the way out of this crisis," Mr. Ozendo concluded, "Reinsurance will continue to be a strong driving force to support clients' planning, manage their volatility, and expand successful business growth". 

Specific benefits reinsurers can provide to their clients in this environment include:

  •     Reducing volatility of underwriting results
  •     Protection against claims escalation and unexpected inflation
  •     Effective and efficient capital relief where access to capital remains restrictive and expensive
  •     Facilitation of M&A activity among insurers.

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