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PartnerRe CEO optimistic on market, sees private capital model as competitive advantage

9th September 2019 - Author: Steve Evans

Emmanuel Clarke, the President and CEO of reinsurance firm PartnerRe, told us he is optimistic on market conditions, seeing the potential for rates to continue firming into 2020.

emmanuel-clarke-partnerre-ceo-wideClarke also explained to us in a recent interview that he feels PartnerRe’s privately-owned capital model is a true competitive advantage, enabling the reinsurer to focus on long-term value creation.

PartnerRe is looking towards the January 2020 renewal season with some positivity, feeling that while negotiations will always be key the market appears more rational.

Clarke explained, “As every year, the negotiations will be about working together to find the best way to support our key clients on their critical purchases and in providing solutions that help them grow their business, manage volatility or strengthen their capital.

“At the same time, we will be particularly vigilant on terms and conditions, so that we ensure the terms of long-term partnership are set or reset in a way that is economically attractive for both sides – after two years of challenging events and profitability.”

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While the PartnerRe CEO does not feel that the market has quite got to where it needs to, in terms of pricing and discipline, he’s certainly more encouraged than a year ago.

“I am optimistic and encouraged with what I’m seeing in the market right now.  We have seen the cost of capital go up with a return to rationality in the market after a sustained period of inadequate pricing and sub-standard returns. Nevertheless, there continues to be more supply than demand in the market. So, while we’re not seeing a wholesale change across the board, there have been a series of meaningful corrections across a number of geographies and segments,” he explained.

Adding that, “These corrections happened because they were needed, and in some cases we expect more is needed.”

But market conditions need to continue adjusting to the reality that rates had perhaps not been sufficient in some areas and loss picks proved inaccurate.

For PartnerRe, further improvement in rates are still required before the reinsurer can really display its appetite for risk it seems.

CEO Clarke said, “Rates are rising in areas where they are needed and often long overdue and we anticipate that rate increases in these classes will continue in 2020. I think there could be more on the reinsurance side. In US Casualty specifically, the primary players are reacting to loss emergence, and I expect reinsurers will also respond, albeit with a lag.

“There are more specific segments that will require more in-depth attention, such as US Casualty, or a number of specialty lines products, e.g. Aviation, Engineering, Energy. We will take a fact and data based approach to these segments, while always looking to differentiate between clients and reflect the quality of our clients’ business in our negotiations.”

PartnerRe was taken private in its acquisition by Italian investment holding company EXOR S.p.A. back in 2016.

Clarke sees this as a key strategic move for the reinsurer.

“Our privately-owned capital model is a true competitive advantage, as it allows us to focus on long-term economic value creation without being distracted by the short-term accounting optics or street reactions. It is a powerful model as it lends itself well to developing long-term mutually profitable partnerships with core clients. It supports our clients’ need to achieve long-term economic value creation,” he explained.

Saying that, “At the same time, we have made the deliberate choice to be a pure play reinsurer, one that does not compete with our clients.

“The combination of private ownership under Exor and our pure play status positions us to be an attractive partner to our clients, which is what will ultimately grow the value of our company.”

Looking ahead, PartnerRe continues to want to grow, but with underwriting discipline at the forefront of its activities.

CEO Clarke explained to us, “It is not one or the other, it is about both. And the way we achieve this is through a deep understanding of and thorough differentiation between our clients.

“We look at the individual needs of each client and identify how we can grow with our clients through mutually beneficial partnerships. It is also about being very clear and transparent upfront on where conditions need to improve to make the client partnerships continue to work, ensuring no surprises at renewal time. With our core clients, we don’t keep “negotiations” discussions for year-end.”

The CEO of PartnerRe also sees opportunities ahead for the firm, as it looks to continue its path of stable growth.

“In Non-Life, we have a mature, well-diversified and balanced book. So, other than market specific conditions that will make us want to accelerate growth, our opportunities to further expand will be client related – continuing to grow as a core and preferred reinsurer to our key clients,” Clarke said.

But on the life side opportunities are clearer, “We see a clear strategic opportunity to grow our Life and Health business, making PartnerRe a true composite company. We have two competitive advantages that give us such option to exercise: we have incumbency of market presence – through PartnerRe’s original Life operation augmented by our acquisition of Aurigen in 2017, and we have an owner who focuses on long term economic value creation.

“As a smaller, more agile reinsurance player, we are unencumbered by size and legacy issues and we offer an attractive alternative for Life & Health clients looking to diversify their reinsurance panels.”

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