The evolution in reinsurance

By: Thys Nieuwoudt, Head Southern Africa, Swiss Re

Reinsurance used to be about capacity: we insure the insurers. We used to be a small club of strongly capitalised companies with settled long term business, established processes and reliable networks.

We played a crucial but relatively comfortable risk management role in a robust financial system. It was a cosy world. Innovation happened at its own pace. While some of us may have dabbled in product development, in general we left the end-consumer to our insurance clients and focused on underwriting, catastrophe modelling or maximising the risk-return trade-off.

But that was then and this is now – Reinsurers have become part of a brave new world via a convergence of competitive and macroeconomic pressure – but most importantly, we are being challenged by the needs of a primary insurer who is constantly looking for competitive advantage, and who expects the reinsurer to do more than just play catch up.

If we feel like our world is changing, it is because our insurer’s worlds are changing. Digitisation, consumer proximity, the looming threat of disruptive competitors from outside the industry, increasingly active regulators and increased pressure from investors to grow.

For today’s reinsurer to thrive, it must be able to add value in this environment.

Today, there is a large expectation placed on the leading reinsurers to be open for discussions on a much broader range of topics. Solutions for capital management, strategic issues such as funding M&A and growth, training and knowledge exchange, Fintech, Big Data solutions, behavioural economics, approaches for seed funding start-ups, or new solutions to reach new demographics.

Reinsurance is moving from “insure the insurer” to “enable the insurer”.

This requires a fundamental decision to invest in innovation, to willingly evolve and to actively participate in the changes that are occurring. We are being challenged to look beyond ourselves, and commit to becoming a differentiated risk knowledge provider focused on insurers’ strategic problems. This is not about reinsurers proving they are innovative. It is about us truly enabling insurers to innovate.

This is exciting. One reason is that we are being challenged to strengthen areas of expertise – for example by bringing in a whole new range of exerts not previously seen in our world: the behavioural economist, the Fintech entrepreneur, the NASA satellite specialist, the affinity group leader.

Those reinsurers who are capable of mobilising a global knowledge base have moved from rational, dry economic conversations on loss ratios and treaty shares, to conversations on blockchain, app development and satellite-based parametric solutions. This shift means increasing the commitment to the market and the partner.

The pressures to increase the strength of the insurer/reinsurer partnership are leading to a corresponding need to increase their proximity to the partner. It is not accidental that a company like Swiss Re is recording in excess of 1000 interactions per year with our leading clients. The range of services, from technical accounting, claims and portfolio management right through to Blockchain pilot programmes have expanded to the point where that amount of interaction is necessary.

We have also reached a point where the enabling reinsurer is looking beyond the insurer of today – and beginning to attract, train and even enable the insurance leaders of tomorrow. The investment in future talent is especially relevant here in Africa, where we face a very unique set of challenges.

All of this is not to say the traditional reinsurance model is no longer relevant. In fact, if we look behind the excitement of the new, it is the basis for all the exciting value-added activities. The partnership begins with certainty on the basics. There will certainly always be a place for good old fashioned “insurance for insurer” backed by financial strength.

But in a disrupted, digital, growing market where our clients continue to look for competitive advantage – there is a new fascinating story beingwritten about the reinsurance value proposition.

And you may wonder why we are so passionate about playing this role in the market. It is simple – with every new innovation we enable, every new policyholder we help to cover, we make a difference in the life of a person, and we make the world more resilient.

Download article as it appeared in COVER’s December 2017 Magazine