NewRe’s Chief Underwriting Officer (CUO) Dirk Herrenpoth says the company is operating “in a position of strength” and is well-prepared to take advantaging of changing market conditions.
Speaking in an interview with Reinsurance News, Herrenpoth noted that NewRe has had minimal exposure to pandemic losses and is now looking to capitalise on the firming rate environment.
“At NewRe we have been very rigorous in managing the cycle and we have given up top line significantly to protect our bottom line. So, we are very well positioned,” he said.
“We have a very healthy portfolio and out of this position of strength, we are now prepared to take advantage of the market situation because we have a strong rating and we have capacity available.”
Herrenpoth, who took over as CUO of the Munich Re-owned Swiss reinsurer in July, said that NewRe’s COVID-19 losses on the P&C side have been “meaningful but very digestible” so far this year.
“We have never had an appetite for pandemics, and we do not plan to grow an appetite for pandemics,” he said, but acknowledged that some areas of potential coverage are still some dispute.
In light of these limited losses, NewRe currently sees no reason to change its strategy drastically, although the company will be looking to eliminate any unintentional exposures in its policy language.
“We will provide clarity on policy wordings and how they respond to pandemic and communicable disease exposure,” Herronpoth explained. “We will definitely try to get this clarity into the wordings as much as possible.”
On this point, the CUO argued that the private re/insurance market should not be expected to take on pandemic risk, which he says should instead be tackled though some kind of state-backed scheme.
“Pandemic is a systemic risk, and a systemic risk needs a systemic response,” he told Reinsurance News. “Otherwise, because of the strong correlation across non-life, life and the asset side, a pure insurance solution doesn’t seem to be possible.”
But with so many other re/insurers having taken heavy losses already this year, the pandemic has helped to put further momentum behind reinsurance price increases.
NewRe has plans to take advantage of this hardening market, and Herrenpoth believes that these favourable conditions could persist for the next two years.
“We would expect that it won’t be just a one-off price increase thing. We would consider it will continue maybe for the next 24 months,” he said.
“But having said this, in the end you have to look at each client individually, how you see the exposure, how the treaty is responding to all the various exposures, and how the pricing has developed over the recent years.”
In taking advantage of changing conditions, Herrenpoth expects that NewRe will benefit significantly from its relationship with its parent company, German reinsurance giant Munich Re.
“The big benefit of having a great big mothership like Munich Re is that we can tap into resources easily,” he remarked.
“This is a very big advantage because we can keep our operation here very lean. And we can really focus on our core business while some of the very large projects are done out of Munich Re, but we can source Munich Re skills when we need them. And that is a very, very big advantage.”
In particular, NewRe’s management is planning to tap into the digitization and innovation capabilities that Munich Re can offer, which are fast becoming priority issues in the reinsurance industry as the pandemic goes on.
“If there’s one really big positive thing about coronavirus it’s that it really pushed the industry towards a more kind of 21st century work style,” Herrenpoth said.
But while, he sees value in the transactional elements of reinsurance becoming as digitized as possible through systems such as electronic placing, Herrenpoth does not see the market going 100% virtual.
“I think we will still see a lot of value in having a personal relationship and exchanging personally. While you can do a lot via MS Teams calls it cannot fully replace a personal relationship,” he said.
“But the transactional element of the deal will digitize more and more. And I think the corona crisis has pushed this trend significantly.”
