PWC: Reinsurance Sector Need to Reinvent Itself
The reinsurance industry should take advantage of the current soft market to diversify and re-invent itself according to a soon-to-be released report by industry analyst Arthur Wightman who works for the Bermuda office of accountancy and professional services firm PricewaterhouseCoopers (PWC).
In a provocative new whitepaper due to be published on-line soon, Mr. Wightman says that with declining rates of return on equity across the reinsurance sector and most companies’ shares trading at a discount to book levels, the long-term attractiveness of the industry now “demands proactive management” and a radically revised business model.
Historically catastrophe reinsurers have depended on big loss events — earthquakes, hurricanes and other disasters — to turn soft underwriting cycles and have not seriously appraised their own longstanding business model reports the reinsurance magazine “Reactions”.
Bermuda is home to more than 1,200 re/insurers with combined assets of more than $490 billion, including the 59 reinsurance giants that make up almost 40 percent of the global reinsurance market based on property/casualty net premiums earned, according to credit rating agency AM Best.
“Wightman wrote his thought provoking white paper after PWC had canvassed the opinion of a cross section of industry leaders,” says the “Reactions” report. “He said: ‘Most CEOs we interviewed had not felt the need to change their business models following the financial crisis. But if you examine the issues that are crowding in on the industry, set against a desire to maximise future opportunity, it is clear that change is needed now’.”
“Reactions” says Mr. Wightman sees new potential opportunities for reinsurers in at least half a dozen different areas and argues that a lack of suitable investment in such opportunities in the midst of this soft cycle, could limit future success as the market turns. “At the other end of the spectrum, a fundamental recalibration of the business model, with substantive investment now, could be the minimum required to stay competitive in an evolving risk landscape,” he told the magazine.
Mr. Wightman’s whitepaper on the future of the reinsurance sector will soon be published here:
