Reinsurers continuing to move into the primary markets is prompting growing tensions between them and insurers, the chairman of Willis Re International James Vickers has warned.
Speaking last week at Re-Insurance’s Pre-Monte Carlo Briefing in London on the 6th September, the broking executive said strains were developing as reinsurers expanded their remit into the primary markets in a bid to grow and diversify.
“Channel conflict between reinsurers and insurers is growing,” Vickers said.
“We’re seeing more of it – a number of our primary insurance clients are starting to ask whether a reinsurer is their partner or their competitor,” he added.
Third Point Re’s president and CEO Robert Bredahl, another speaker at the Pre-Monte Carlo Briefing acknowledged that tensions are bubbling between the different players in the market. However, Bredahl said there were advantages to the situation.
As a total returns reinsurer, Bredahl said the growing animosity between primary insurers and what he deemed “combo-companies” was working in the carrier’s favour.
“We’re not seen as a threat,” Bredahl said.
Bredahl explained that carriers seek out cover from Third Point Re as it is not dipping a toe in the primary insurance market.
“We have a very different business model to others in the market,” Bredahl said.
“We take a lot of risk on the investment side – we drive enough diversification from that and reinsurance,” he added.
Mark Watson, CEO of Bermudian (re)insurer Argo Group also acknowledged the conflict developing in the market and blamed reinsurance carriers who venture into the primary market as responsible for driving down prices. “I’ve witnessed a number of our competitors go into the primary space,” Watson said.
“They offer the lowest price and create the most frustrating results for the rest of us,” he added.
“I prefer buying reinsurance from reinsurers rather than my competitors.”
While Vickers said he remains “ambivalent” on the issue, he said the situation is being exacerbated by the lack of alternative areas of growth available for reinsurers.
“They [reinsurers] are moving into primary as can’t get growth anywhere else,” Vickers said.
“But if it looks like they can achieve growth elsewhere primary will become less attractive,” he added.
Vickers pointed to third party capital management as an area he foresees reinsurers having better luck. “It not only brings benefits from a diversification point of view but it relieves their capacity strains,” he said.