In the challenging global reinsurance market differentiation is key and Qatar Re is pitching itself as a reinsurer that doesn’t follow market norms.
Qatar Re wants to be seen as different, as a reinsurer that is able to pick and choose its specialist opportunities in order to outperform the sector, and avoid the worst of pricing and terms.
Gunther Saacke, Qatar Re’s Chief Executive Officer, explained this today, noting that the reinsurance market is a “continuously degrading market environment” causing the reinsurer to focus on consolidating its underwriting book in 2016.
Saacke said that the reinsurer has slowed down its premium growth, which had been quite aggressive in recent years as it ramped up its portfolio, as the company switched its focus to “price adequacy.”
While shifting away from reinsurance business it deemed to be underpriced , Qatar Re has doubled down on finding new opportunities that do meet its return hurdles, with new opportunities thanks to “highly specialist reinsurance transactions and bespoke support of insurance entrepreneurs,” Saacke explained.
The upshot of this is, “Qatar Re is not a market tracking reinsurer, meaning that we are well placed to weather the effects of irrational price competition, supported by our growing and globally diversified multi-line franchise,” he said.
Market tracking is, of course, a viable business model unless the market is unattractive as a whole. There are reinsurers out there who essentially provide their shareholders a way to access an index of the market. In the same way there are ILS fund managers offering a similar broad exposure to the entire marketplace.
This has a value, but in testing times when pricing is softened across the entire market, a more selective approach is the way to outperform.
Despite the pull-back on unattractive business Qatar Re increased its gross premiums written by 8.1% in 2016 and the effects are an increase in net income of 52.3% for the year. However this was largely due to much improved investment performance, as large losses and catastrophes hit the firm (as they did the market) in 2016.
In terms of where Qatar Re is looking to differentiate its book, it reduced its participation in some reinsurance treaty lines, including Marine and Energy, Non-US Property Catastrophe, and Middle East Property and Casualty. Where it increased its participation was in UK Motor structured deals, International Property Facultative, and US Property Per Risk reinsurance deals.
It sees those lines as still producing attractive returns, while also adding some new specialist lines such as Residual Value Insurance and US Casualty which it sees as offering future growth at attractive returns.
Qatar Re believes that in the challenging market it is key to offer an “entrepreneurial and individualised client approach,” and with this it hopes to secure “project-based opportunities with insurance entrepreneurs and innovators who require bespoke solvency relief and capital management solutions.”
As a growing reinsurance power in the world Qatar Re has built a strong reputation relatively quickly. This approach is one followed by so many right now, of shifting and changing focus in order to find returns, but at Qatar Re’s size and with its backing it perhaps has an opportunity to be a little more selective than some, which could result in an ability to perform outside of the market tracking norms.
