Power of Insurance Technology Can Drive Growth in Soft Market – Baden Baden 2015

Reinsurance season in the run up to the 1/1 renewal is a hugely busy time for the international reinsurance community with plenty of late nights, long days and hundreds of meetings. It’s hunting season, of course, the time of year when the mighty reinsurers set their sights on their nimble cedant prey.

From September onwards, the timetable is fixed – the pleasures of the Monte Carlo Rendezvous followed by the more austere setting of Baden Baden as renewal fever ramps up.

Migrating from the azure skies of the French Riviera to the tranquil pleasures of Baden-Baden – a spa town in southwestern Germany’s Black Forest – is certainly no hardship, as DOCOsoft’s roving reporter found out following her mission to get the low down on this year’s reinsurance renewal at the fashionable 19th-century resort.

SCOR’s Monday evening cocktail party at the Orangerie Brenner’s Park Hotel was a great venue to upload the latest thinking on reinsurance trends in 2015 where the fear was that the conference would be dominated by talk of over-supply and consolidation. That was certainly a topic that came up time and time again during the SCOR cocktail party and indeed throughout the rest of the conference.

Claims Management

From a topical claims management perspective, it was reported that XL Group expects to record a $100m loss from the Tianjin explosion when it announces its third quarter results on October 26. The re/insurance group, which operates under the XL Catlin brand following the acquisition of Catlin earlier this year, said around 70% of the Tianjin loss will be recorded in its reinsurance segment.

According to Insurance Day’s Baden Baden Tuesday newsletter, “The Tianjin blast is the costliest industry loss of the quarter, with the total bill still subject to considerable uncertainty. Reinsurance broker Guy Carpenter has previously estimated the industry bill to be between $1.6bn and $3.3bn, while broker JLT has warned cyanide contamination to containerised cargo could see the industry loss figure balloon to between $5bn and $6bn.”

Consolidation and Soft Market

There was plenty of time for delegates to discuss other matters, however, and a number of other lines of thought were rather neatly summed up in a round up by the Intelligent Insurer newsletter produced on the Tuesday of the conference. The importance of innovation in today’s soft market was emphasized.

According to William Mills, group head of ceded reinsurance at Beazley Group as reported in Intelligent Insurer:

“Baden-Baden for us is really about communicating our plans for 2016 with our many reinsurance partners. Notwithstanding a very difficult market, with our focus on diverse specialist classes and nimble and innovative underwriting we can talk very positively about opportunities in 2016. I hope we can talk about demand but I fear another conference will be dominated by talk of over-supply and consolidation.”

Meanwhile, Carlos Wong-Fupuy, senior director, analytics, AM Best, said.

“The soft market conditions are still the main feature. Others could be: the emergence of hedge fund-backed reinsurers and the competition or opportunities they offer; reinsurers partnering with alternative capital; the low interest rate environment and investment opportunities in ‘real assets’ such as infrastructure projects; and a flight to quality—the dominance of the major players.”

The Importance of Technology

The insurance space is currently experiencing a technological renaissance of sorts – for evidence of this, one need look no further than DOCOsoft’s pioneering work with Xchanging on the Write Back initiative.

Most delegates at this year’s conference were agreed that technology was set to play more of a key role in driving the reinsurance sector through this period of consolidation and rising levels of exposure as emerging risks such as cyber liability become an increasing concern.

According to Aon Benfield’s Insurance Risk Study: Global Insurance Market Opportunities:

“The pace of change in the global economy today is truly staggering. Change is bringing new, emerging risk types, offering new opportunities for the insurance industry. At the same time, the industry has seen an influx of non-traditional capital as well as new enabling data, technology, and analytics capabilities. Taken together, favourable developments in all three strands of the market—demand driven by new risks, supply from new capital, and empowering data and analytics—make the outlook for the coming decade very bright.”

Ending on that positive note, DOCOsoft’s dedicated roving reporter decided it was time to find out where the duplication in the name Baden Baden came from – was it because it liked to Party Party?

The long night ahead offered plenty of opportunities to find out.