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Companies that have embraced tech will be well placed for the future: Faries, Tokio Millennium Re (Bermuda)

11th September 2018 - Author: Luke Gallin

Reinsurance companies that have started to adjust their operations and that have embraced the rise of technology are positioning themselves well for the future, according to the Head of the Bermuda branch of Tokio Millennium Re AG (TMR), Kathleen Faries.

Kathleen FariesReinsurance News recently spoke with Faries to discuss trends in the global reinsurance market, both generally and from TMR’s viewpoint.

For TMR, said Faries, “2018 is shaping up well in Bermuda, so far, although we are operating in a market that is overcapitalised and very competitive. We continue to sharpen our risk analytics to enable us to maintain a highly disciplined underwriting culture.”

Discussing the wider reinsurance market, Faries said that participants “will continue to be pushed to transform their operating platforms and cost base in order to compete and deliver attractive returns.”

Adding: “Firms that have started to transform their operating platforms, leverage technology, and find ways to dynamically manage their capital base will be in a better position in the coming years. There is no doubt that the industry is still vulnerable to disruption across the entire value chain if we are not able to transform the way we deliver value to our customers and efficiently transfer risk.

“I am hopeful that the strides many companies have recently made to partner with technology and be open to new ways of doing business will accelerate the pace of change and our ability to transform from within.”

She continued to highlight the steps TMR has taken to integrate digitalisation and technology within its strategy.

“An agile and integrated systems architecture has become an important part of how we view success in the future. Providing our staff with better tools and a more integrated operational platform has been a focus of ours over the last few years.

“In addition, we have invested in streamlining the work we do with our third-party capital partners through a bespoke cloud-based trading platform.”

The rise of technology and its increased focus on the global insurance and reinsurance markets shows no sign of slowing down, and as noted by Faries, the risk transfer industry remains vulnerable to disruption.

However, in a marketplace that remains overcapitalised and highly competitive, despite the large losses experienced in 2017, embracing technology is seen by many in the industry as a way to lower costs and increase efficiency in a challenging marketplace, while ultimately making the insurance process more beneficial to the end consumer.

Despite the high level of insurance and reinsurance industry losses experienced in 2017, primarily driven by hurricanes Harvey, Irma, and Maria, as well as devastating wildfires in California and powerful earthquakes in Mexico, the reinsurance sector remains highly competitive and overcapitalised.

Prior to the events, industry commentary had suggested that losses of this nature might well scare off alternative capital and at the same time remove enough capacity from the marketplace that the supply / demand imbalance that persisted through the softened market landscape, might reverse.

However, alternative capital actually increased in time for the January renewals, and, with primary insurers retaining much of the losses the events of 2017 were more of an earnings event than a capital event, meaning that an abundance of reinsurance capacity remained available from both traditional and alternative providers.

Commenting on alternative capital, Faries explained that the firm views its strategic partnerships with the expanding sub-sector as a growth opportunity.

“In addition, we intend to continue to use our deep analytical expertise to assume risk that requires a specialized understanding of the business. Pricing will always vary by line of business and by geography and depends on many factors such as loss activity, supply or the availability of capital, demand and leadership behaviour.

“An experienced underwriter will find opportunities in changing market dynamics and under any loss conditions.”

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