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Actuarial Science and Insurance Series: insurance-and-pensions

Global Reinsurance Masterclass series 3 - Winning the game

Reinsurance providers have typically avoided head-to-head competition. However, industry evolution is generating greater rivalry that is driving reinsurers towards new strategic positions. This masterclass identifies these strategic groups and analyses the moves reinsurance companies can take to prosper.

Author(s): Professor Paula Jarzabkowski - Cass Business School; Professor Laure Cabantous - Cass Business School; Adriana Allocato - Cass Business School

How to identify reinsurance rivals and spot opportunities for growth

In 2009, Bermuda-based company Partner Re became a top-five reinsurer worldwide, following the acquisition of Paris Re, a Swiss-based diversified reinsurer. In 2010 Amlin announced its plan to establish a reinsurance company in Switzerland. Catlin then established a reinsurance platform in Zurich to underwrite reinsurance business from European markets. These moves reflect a growing reinsurance orientation towards European business. Zurich is emerging as key reinsurance hub. Supported by a regulatory framework that is seen as closer to Europe's new capital regime, and competitive tax rates of its own, Zurich is providing an attractive alternative to Bermuda for reinsurers. What has led this charge to Europe?

In the last five years the global market value grew by a mere 1.2%. Such marginal growth has increased competition and prompted some reinsurers to look for alternative markets where they have previously had little access to business. Bermudian reinsurers have therefore assessed the possibility of increased demand in Europe. During the past decade, the European insurance market has experienced strong consolidation, which, supported by the recent turbulence in global financial markets, has prompted reinsurance buyers to diversify their insurance risk and spread their counterparty risk. In addition, the new capital adequacy rules which are expected to be introduced via the EU's Solvency II directive would be likely to increase insurers' demand for reinsurance cover to reduce earnings volatility. These factors suggest that the European market might provide an attractive opportunity for new and strongly capitalised reinsurance entrants to offer improved choice to existing European insurers.

In this competitive landscape, firms investing in new reinsurance subsidiaries have an interesting strategic choice to make: whether the subsidiary should continue the parent company's strategy, or whether it needs a different strategy to compete in its particular market conditions. This masterclass poses the following questions:

i) What strategic positions are currently seen in the reinsurance industry?

ii) Could these strategic positions be improved? and

iii) How could reinsurers successfully adopt (and integrate) a new strategic position?

The complete Masterclass 3 file "Winning the game" can be downloaded via the link below.

Global Reinsurance Masterclass 1: Re-think reinsurance and Global Reinsurance Masterclass 2: Fit for Purpose? are also available.

The Global Reinsurance Masterclass series is sponsored by ESRC, WCI and IICI.

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