Despite the rise of technology and other market disruptions, relationships remain a key component of the reinsurance landscape and the business is still a combination of both art and science.
This is according to Amer Ahmed, Chief Executive Officer (CEO) of global insurer Allianz’s reinsurance division, Allianz Re. Reinsurance News met with Ahmed around the annual meeting of the reinsurance industry in Monte Carlo, and the influence of technology, alongside other market trends, was discussed.
In light of the rise of advanced technology and its increased focus on various parts of the insurance and reinsurance sector, the role of the broker has, at times, been under the spotlight.
Ahmed explained that despite technology being more prominent in the space, Allianz Re’s relationship with brokers hasn’t changed significantly.
“Much of the discussions we have with them focus on different perspectives about how we use cat models. On the modelling side I think technology is providing a platform and also an opportunity for us to enhance the dialogue, on the placement side, I would say, at this point it has had no impact,” he said.
When asked if he expects that to change in the future, Ahmed told Reinsurance News that it’s not impossible to imagine that reinsurance becomes a tradeable instrument.
“For that you’d need a lot of standardisation and the market would have to move in a different direction.
“To me, reinsurance is still a business which is as much art as science. I remember some time ago having a discussion with somebody who runs an ILS fund, talking about the relationship between a buyer and an ILS provider, in comparison with the relationship between a buyer and a traditional reinsurer, who you have be trading with for many, many years. These are different approaches and different products involved, we should not assume that one is the same as the other.
“Technology may allow this kind of trading platform and I’m sure something like that will come, but it will be for a different product and I have to ask myself as a buyer: what is it that I want? I personally see tremendous value in the traditional reinsurance product, which we certainly could make more efficient and standardised, yes. But I still very much like the kind of trusting and flexible relationship we have with our core reinsurance parties – I think there is tremendous value in that. And to move from there to a faceless trading platform would be a stretch from my point of view.
“If you want to buy ILWs, which is a pure commodity, absolutely fine to have this faceless transaction. But if I want to buy something where the exposures are evolving, changing, the interpretations of coverage are sometimes up for debate, I think we should not misunderstand the value of what we have today,” said Ahmed.
Allianz is a truly global insurer and reinsurer with a very complex risk landscape, and Ahmed noted that the firm invests a lot of time, together with its reinsurers, in understanding exposures and discussing their views of risk.
“It is very, important for us that our reinsurers understand the risks that we are giving them and that requires this detailed dialogue and discussion and that would not be possible to replicate in a pure trading form,” said Ahmed.