Amid the intense competition in reinsurance, Gen Re continues to adhere to a key plank in its strategy – assuming risk at terms that are commensurate with the exposure.
As Mr Warren Buffett, Chairman of Berkshire Hathaway – the company which owns Gen Re – once said: “You only have to do very few things right in life so long as you don’t do too many things wrong.”
Thus for Gen Re, sticking to the basics of profitable underwriting has proven to be the right strategy regardless of market cycles. And for Mr Andrew Flitcroft, who was appointed on 31 July to lead Gen Re’s business in Australia, while also being a key member of the group’s Asia-Pacific leadership team, that overarching principle is especially relevant amid Asia’s rapidly growing markets.
“We definitely have appetite to write Asian business but it has to be on terms which are appropriate,” he said.
Gen Re has a long term commitment to the Asian region and is resolute in servicing the needs of its clients. But while it sees the undoubted possibilities in Asia, it believes in taking a “tempered approach to addressing that potential.”
“It’s a changing world with considerable uncertainty; there’s significant regulatory change, much of which is for the better, investment uncertainty which has an influence on the underwriting side of the equation, plus there is the constant change in exposures particular to Asia that is brought about by increasing urbanisation and escalating rates of insurance penetration and density.
“While change will always bring opportunity, sometimes the enormous potential can overshadow the question of whether the exposures are really understood. The events of 2011 showed that and more recently you see something like Tianjin where there are multiple lines of business that have been affected from one event,” he said.
Adding value to relationships
Gen Re is not new to the region, and through its acquisition of Cologne Re has had a presence in Asia for nearly 50 years.
“All our offices are staffed by local people which means we understand the region, the risks and most importantly our clients.”
Having local knowledge and relationships are especially important for Gen Re, and this is constantly reinforced by its core strategy of having direct contact with all its clients.
“We understand that brokers have a part to play in the process but we always want to sit down and engage in a direct dialogue with our cedant.
“This dialogue – risk taker to risk taker – results in our being able to better understand the various requirements of our client, which means a better understanding of the exposures being ceded, which results in the best possible solution for our clients’ needs.
“It’s about a meeting of the minds and that clearly makes for a much stronger bond between us and our clients.”
Despite the prolonged soft market, reinsurers have generally maintained strong balance sheets, helped in part by the lack of major catastrophe losses in the last three years. However, the industry cannot afford to be complacent by allowing technical standards to slip, said Mr Flitcroft.
“Just four years after the most costly year in the history of insurance, and we see that for some time rates have dropped and terms and conditions are wider. There is a lot of new capacity entering the market but the exposures remain and are in fact increasing.”
For Gen Re, sticking to the fundamentals of the business is something that can never go out of fashion.
“We can’t control all the market forces but we can control the underwriting actions we take, and the service we provide to our clients. We believe insurers want stability and consistency from their reinsurers and these are attributes we are proud to deliver.”