Reinsurers have been expanding their product range and reach with reinsurtech investments and developments, and are using technology as an interface to pass on risks to the capital markets – factors which show the industry is choosing to embrace and flow with the changes instead of buck the tide of the 4rth revolution.
S&P noted in a recent report that while technology, over the long-term, is likely to lead to a compression of the value chain which could see alternative capital gain a greater business share, by getting on board with reinsurtech innovation, reinsurers are setting themselves up for a strong and competitive market position.
The alternative market using technology to directly access primary risks is a factor that’s likely to develop over the longer-term, S&P noted, giving reinsurers sufficient time to evolve as needed and protect their market share.
S&P Global Ratings’ credit analyst Jure Kimovec, said; “The reinsurance industry was on a similar path to embrace technological innovation in 1999-2001, without having much of an overall effect on the business model itself. Therefore we question how material the impact of reinsurtech will be.”
“We believe that although reinsurtech may benefit reinsurers, its impact will likely remain modest in comparison to any large catastrophe event.”
Kimovec continued; “We consider that the compression of the value chain through reinsurtech would be a long-term, gradual process, and not significant in the short-to-medium term, giving traditional reinsurers time to adapt their business models and reposition themselves for the new opportunities and challenges that will inevitably emerge.”
The rating agency believes that despite the evolution of the reinsurance market place, traditional values like client relationships, reputation, and financial strength will remain among the most important features of successful firms.
“In S&P Global Ratings’ view, the most important factors for cedents when choosing their reinsurers will remain the financial strength ratings on the reinsurers, their willingness and ability to pay claims, the opportunity for long-term partnering, competitive pricing, and the scope of cover.
“We also consider that, with the current levels of capital available in the sector, one important focus for reinsurers remains their price competitiveness against alternative reinsurance capital.”
