Structured Prospective Reinsurance Solutions
At Swiss Re we feel that the era is behind us where we differentiate structured reinsurance or non-traditional reinsurance from regular or traditional reinsurance. It's not about specific features and characteristics of reinsurance products; the client's motivation and benefit metrics are at the centre of our considerations. Nor is it about specific lines of business. We capture all non-life lines – from Property & Casualty to Specialty (Aviation, Marine, Engineering, Agriculture, Credit & Surety, and others).
Tailoring solutions in collaboration with clients
This allows to design and tailor reinsurance or capital market risk transfer solutions to support clients' individual goals. Our teams have the entire product suite and expertise of Swiss Re at their finger-tips; hence it all starts with the client's motivation. Once this is well understood, the solution is then co-designed with the client. Rapid prototyping and continuous dialogue and refinements allow us to design the best solution at the intersection of clients' needs and our capabilities.
Recent market trends and themes
•Accounting: International financial reporting standards are subject to changes and modifications, e.g. IFRS 4 phase 2, but also changes in terms of IFRS 9, further potential considerations regarding US GAAP and IFRS convergence. On a local level, many countries have adopted and continue to adopt IFRS for their local financial reporting regimes. While accounting considerations per se are not drivers of reinsurance solutions, understanding potential ramifications and consequences for volatility and capital management is key.
•Regulatory changes: With the International Association of Insurance Supervisors, we see increasing numbers of countries and regions migrating to more risk-based solvency regimes. Obviously, reinsurance as a capital substitute is an instrumental part of any pillar 1 considerations (quantitative approaches and capital management). Moreover, for selected clients we also share our own approaches in risk management and risk reporting (pillar 2 as well as pillar 3) and compare these with standards in the various markets.
•Holistic risk management: We see more clients striving to optimise their balance sheet and their earnings power from a corporate and enterprise perspective. Smart combinations of business unit protections and corporate risk management or enterprise risk management solutions require embedding in clients' risk cultures. Ultimately it's about fully leveraging diversification potential across various dimensions of risks.
•M&A: The traditional suite of solutions is well known – capital management and purchasing price optimisation for buyers and sellers. It also concerns management of volatility and potential surprises or peer deviations; this refers to pre-merger as well as post-merger approaches.
•In-force portfolios: While this is more a Life & Health related motivation, we see clients also exploring the full potential on the non-life side of the house. Reserves, reserve risks, capital consumptions, counterparty considerations, and more, are all topics that can be discussed and managed with support of customised reinsurance.
On the above basis, we've been able to more specifically cluster clients' motivation in these areas:
•To enhance efficiency: Some clients continue to leverage market price developments; with that, these clients introduce a dependency on reinsurance market price and reinsurance capacity into their corporate risk management strategy. Most clients revisit and optimise their reinsurance and risk mitigation structure overall. Typically these comprise of three avenues: (a) risk transfer and protection needs, (b) strategic approaches to capital management and corporate finance, (c) franchise management and management of surprise potentials.
•To protect and safeguard net volatility: Reinsurance goes far beyond trading premium versus losses, also far beyond capital cost relief versus ceded margins. For example, it can address managing the firm's credibility, addressing surprise potential for stakeholders, and therefore protecting the firm's franchise value and optimising investors' and stakeholders' performance targets.
•To support growth and capital management: Reinsurance serves as a capital substitute. Therefore our teams support smart combinations of equity, debt, and reinsurance. This can support achieving rating capital targets, regulatory capital adequacy, or other capital management-related topics like capital fungibility and RoE optimisation.
•To benefit from specifically tailored and innovative solutions: This is where we feel especially comfortable. Share your dream with us, bring us your challenge. Our teams are more than happy to explore possibilities with you. Sometimes these discussions don't lead to reinsurance solutions. However, sometimes they lead to unique approaches that leverage the full bandwidth of Swiss Re's engagement model.
Our Structured Solutions teams are embedded in our local client and cross-functional teams. This allows the leveraging of specific expertise around the globe while at the same time being fully embedded in individual client accounts. The following examples characterise how we leverage our seamless organisational set-up in client teams:
•Traditional solutions and Structured Solutions: Swiss Re does not differentiate between types of solutions. We make sure that the appropriate expertise and experience is involved, either in a client-facing function or behind the scenes.
•Prospective Solutions and Capital Market Solutions: Swiss Re feels uniquely positioned to fully leverage reinsurance and capital market approaches, and to find combinations thereof to find a best fit for our clients.
•Prospective Solutions and Retrospective Solutions: In many instances, it's not about an either-or approach, but rather about a smart combination of retrospective and prospective reinsurance approaches. We cover the entire range from separate products to combined packages and uniquely integrated solutions.
•Retrospective Solutions and Capital Market Solutions: This is an exciting field where we explore specific situations in collaboration with selected clients.
Swiss Re' Prospective Solutions focuses on non-life lines of business. If you have an inquiry about a Life & Health Structured Solutions, please see LHSS and Admin Re®.