Traditional reinsurers must remain relevant in order to survive challenging market dynamics and the current state of flux, but stay mindful about which areas they diversify into—according to Paddy Jago, president of Willis Re.
Jago claims: “If there’s one thing I’d advise all reinsurers to be at the moment, it is to remain relevant. To be relevant, your number one priority is to have a high degree of expertise. That matters above all else. Secondly, I think you have to be of a certain size. Lastly, you need to have relationships in place in the reinsurance market. These three things will dictate whether you remain meaningful in the reinsurance business in the future.”
As traditional property catastrophe reinsurers experience increased competition from the flood of capital markets capacity, some will diversify into other lines of business. Those doing so should proceed with caution, warns Jago in a video blog on WillisWire.
“What concerns me is that you’ll have markets going into areas where they have no idea what they’re doing. For me, the broker, maybe that will be a pot of gold, because I’ll have a market who is unable to rate the risk commensurate with the exposure. But if they don’t understand what they’re doing they could end up exacerbating their problems, and instead of growing their top line – which is the reason they’re entering new markets in the first place, they could end up exploding their bottom line,” he added.
