Q: Opportunities. Where do you see the best opportunities for growth: new lines, new territories, specialty insurance or reinsurance, managing capital of third-party investors or partnering with alternative capital providers, something else? Explain.
Gregory S. Hendrick, Executive Vice President and Chief Executive, Reinsurance Operations, XL Catlin
As far as growth, we’re taking a two-pronged approach: one through geographical expansion, the other through product innovation. Geographically, we have two potential target markets in mind: India and Africa. In the first market, XL Catlin has a substantial presence thanks to our back- and middle-office support functions that are based there. To ensure we execute our geographical plans, Brendan Plessis has joined the XL Catlin team, stepping into a newly created role—head of emerging markets. In this position, Brendan is taking lead in the development of emerging market strategies, partnering with business leaders across XL Catlin to explore and assess both current and new opportunities for continued growth around the world and expansion into new markets.
In terms of new products, one of the tools for product innovation is taking place in XL Innovate, a venture capital fund backed by XL Catlin and launched in April that is focused on creating ventures that provide new and innovative solutions to risk. Reinsurance has not been on a big growth path in recent years, and it is incumbent on the industry to develop new products and find new revenue streams. That is the idea behind XL Innovate.
Brian Boornazian, Chairman, Aspen Re and President, Aspen Re America
Given the current pricing environment in most mature markets, it is only natural that companies look elsewhere for growth. However, this is much easier said than done.
Emerging markets often are fraught with new challenges. In these markets there are often greater unknown risks, and underwriters frequently have to deal with inferior data quality more often than in more mature markets. This is often compounded by these emerging markets being flooded with capital, which can lead to situations where rates are actually lower than more mature markets where data quality and understanding of risk is better.
These certainly aren’t ideal conditions for profitable underwriting and emphasize the importance of companies investing in superior talent at the local level to ensure a greater understanding of risk and the markets. The companies that make this investment and have the patience to seek and identify the quality risks and grow in a responsible manner will be the successful ones.
At the same time, we live in times where new forms of risk are emerging in all markets that need to be addressed, and as an industry we have not adequately provided for these risks. Areas like cyber and other risks that have evolved as society evolves will provide ample opportunity for those companies with the best knowledge, innovation and willingness to take risk.
Chris Donelan, President and Chief Underwriting Officer, Endurance Re U.S.
Since Endurance is already participating in most lines where we see opportunity in the current environment, our strategy for growth includes continuing to build our portfolio with our current clients, working across our products and seeing our business as global in nature.
I don’t think any opportunity should be written off without consideration, but I would hope that companies partnering with alternative capital providers, etc., truly understand the value proposition and are not just checking boxes or jumping on the current bandwagon.
Mike Krefta, Chief Underwriting Officer, Hiscox Re
The biggest opportunity must be in bridging the gap between economic and insured losses. In new, emerging markets this is a given, but many people ignore the existing opportunity in developed markets. Flood cover in the U.S. is a great example of a risk that is not as widely bought as it could be and one that currently sits on the U.S. government’s balance sheet under the form of the National Flood Insurance Program. Insurers and reinsurers need to provide a credible alternative to the NFIP. Earthquake risk is another area where takeup rates in established, mature markets like the U.S. and Japan are still incredibly low. There is ample opportunity to increase insurance penetration in developed markets as well as emerging ones.
Tad Montross, Chair and CEO, General Re Corp.
I think the biggest growth opportunity for the industry is in the large discrepancy between insured losses and economic losses in almost every natural catastrophe event.
Bill Donnell, President of U.S. Property/Casualty, Swiss Re
At Swiss Re, we’re already working with clients and partners to develop new products and services that tap into all the opportunities that economic, social, technological and regulatory changes are bringing. There are dozens of growth initiatives where we focus our efforts on new products, new clients, new processes, new regions, etc.
Swiss Re is successfully pursuing a high-growth market strategy where we bring our global expertise to the emerging economies with the highest promise for insurance and reinsurance market growth.
We also have a team dedicated to emerging risks. We produce the SONAR report, which looks at emerging risks. So we are not focusing solely on today’s risks but tomorrow’s as well.
(Editor’s Note: Donnell is set to leave Swiss Re on Dec. 7 to become president and CEO of the National Council on Compensation Insurance.)
Steve Levy, President, Reinsurance Division, Munich Reinsurance America Inc.
In the U.S., we feel all of these provide opportunities. However, our focus is on expanding the boundaries of insurance.