As one of the leading pioneers of tailored business product development, Swiss Re has said it’s seen success in higher returns from specialised reinsurance products, and has laid out plans to offset competition by continuing to grow this smaller-scale but more lucrative line of business.
The reinsurer told Reuters it had branched out with its own tailored schemes products, where it acts as sole-reinsurer, retaining the complete profit share, instead of using a syndicate to spread risk.
Swiss Re lead the way in tailored transactions in a ground-breaking deal in China, where it developed the country’s first anti-poverty insurance deal, it’s also created products for farmers’ flood and draught protection, Reuters reported.
Swiss Re said its niche product offers have helped to grow recent premiums growth, but speaking of the challenges involved in specialised reinsurance, the head of Swiss Re’s core reinsurance business, Moses Ojeisekhoba told Reuters; “It’s not something you simply take off the shelf and apply to a particular situation.”
“You require deep skill sets. You require strong balance sheets. You require relationships and knowledge of the counterparty’s portfolio and their financials, and you clearly require an unambiguous understanding of the regulatory regimes.”
But other reinsurance giants have been quick to jump aboard the specialised products bandwagon.
Munich Re has started pushing tailor-made aerospace and cyber risk niche products closer to the top of its sales agenda.
It’s also announced plans to invest into Wrisk, a smart phone app offering insurance, as well as other insurtech start-ups, Reuters reported.
And with reinsurers operating in a market space undergoing a technological revolution, the race to invest in innovation or become obsolete means Swiss Re, like others, will have to continue to run its invest, pioneer, and experiment circuit.
Reuters reported Swiss Re has a $250 million annual R&D budget for risk model development – allowing it to continuously seek new risks, specialised deals, and better management of current risks.
A recently published A.M. Best report has affirmed this focus on specialisation and tailor-made products is a growing offshoot of fierce competition, not just for reinsurers, but also within the primary insurance industry, a factor that will further drive demand for reinsurance specialisation.
According to A.M. Best, the increasingly competitive market is pushing insurer’s towards innovation and into taking on newer risks such as cyber or specialist insurance lines, but this requires a greater reinsurance cushion to provide extra fall-back capital, and in some cases, the help of reinsurer’s technical expertise.