The Re/Insurance Industry In 2014 And Beyond
William Pollett, President and CEO of Blue Capital Management Ltd., and Matthew Wilken, President of Argo Re both believe there is likely to be a softening of the market in 2014.
Mr. Pollett and Mr. Wilken were taking part in a panel discussion called ‘The Big Picture: The [Re]Insurance Industry in 2014 and Beyond’, the first panel in the annual EY Global Insurance Outlook, at the Fairmont Hamilton Princess on 5 December 2013.
As well as Mr. Pollett and Mr. Wilken, panelists included April Galda, COO at Ariel Re, and Mark Wilcox, Senior Vice President, Chief Accounting Officer and Corporate Controller at RenaissanceRe Holdings Ltd. The Bermuda Monetary Authority’s CEO Jeremy Cox gave the keynote address.
A raft of EY Global and Bermuda executives provided insights, including Dave Hollander, Global Insurance Advisory Leader, and Pete Cangany [pictured], Partner and Bermuda Insurance Sector Leader. Mr. Pollett and Mr. Wilken were asked if they were seeing rates, as well as terms and conditions holding.
“The rates will fall, that is a given. All in all there will be pressure on the rates and the terms and conditions are slipping. The reality is that we are in a softening market,” said Mr. Wilken.
And Mr. Pollett added, “We are heading into a market cycle where underwriters need to have the courage to say ‘no’ and walk away from business. There are some challenging times ahead.”
They believe the regulatory environment will get tougher and more costly and that there is a feeling that interest rates will rise next year.“It is a tough time. It is time to be very careful and very disciplined, but to also be in a position to react opportunistically,” said Mr. Pollett.
Pete Cangany, William Pollett, Matthew Wilken, Dave Hollander
They also believe that Bermuda remains an optimal place in which to conduct business.
Mr. Wilken said, “Bermuda is a very important, integral part of the global reinsurance space. We have been able to grow with the Bermuda Monetary Authority, which has led to flexibility, which is critical.”
And Mr. Pollett added, “Absolutely. Bermuda is still an excellent domicile from which to operate. A number of the new start-ups have chosen Bermuda, which again provides continuing evidence that it leads the way. The regulator here is extremely professional, proactive and very responsive.”
And asked about opportunity and innovation, both were equally enthusiastic about the future.
Mr. Pollett added, “Some of the products we have been offering over the last decade have been same old, same old. Some smart folks have come in looking for different ways to provide solutions which is exciting.
“There is a lot of innovation and a lot of opportunity for innovation. For example, only around twelve percent of households in California have insurance that protects them from earthquake damage but significantly more have mortgages. There’s a need for more cost effective risk transfer solutions on a massive scale.”
Pete Cangany, William Pollett, Matthew Wilken, Dave Hollander
According to Mr. Wilken, there is always an element of underlying risk. “People continue to build houses in more vulnerable parts of the world than ever before. I think more reinsurance should be bought to protect companies.”
He said it was now a reality that there was an increasing frequency and severity of events, coupled with an increasing population. “There is opportunity to expand,” he said. “There are huge tracts of the world that have very low insurance penetration.”
He added, “We have a tendency to focus on the developed nations, but the tragic events in the Philippines recently show how little insurance penetration exists there.
“There must be an opportunity to spread the world’s wealth and capital and be able to protect those people who need it most.
“Insurance is about spreading the loss of the few amongst the many and sometimes we get so wrapped up on returns on capital and making money, which is absolutely essential you have to make money, we sometimes forget that there is a social element to make sure people protect themselves better.”
