Prioritising long-term, sustainable growth by finding a balance of risk
We can’t be all things to all people at QBE Re, but I think we can be ‘all things’ to some people.
We’re often asked about our core strategy as a reinsurer, and first and foremost our focus is on long-term partnerships, deploying capacity in a way which deliberately complements the broader QBE Group.
It is important that we are seen as relevant and over time this may mean redeploying capacity within programmes and between cedants. Exceptions aside (and there will always be exceptions) we typically prefer to provide more capacity to a targeted number of cedants where we can ensure a solid understanding of the risk we are underwriting, rather than spreading our capacity and capability too thin.
At QBE Re we often talk about sourcing risk through two key pillars. The first is where we play in the same markets as our insurance colleagues, writing to larger programmes to build a buffer between a difficult year for insurance and reinsurance. We are fortunate to benefit from a strong A+ rated balance sheet, geographic presence in North America, Bermuda, Dubai, London and Brussels and an impressive mix of products.
The second is where we play a role in accessing diversifying risk pools where our insurance franchise carries less exposure. If we join these attributes together in our broker and client proposition, I feel we can be an attractive market.
Last year Andrew Horton, QBE Group CEO, stated that we were in reinsurance growth mode, but also looking to reduce volatility, with a step back from property cat and retro.
Our priority has been the re-positioning of our book and a focus on ensuring our programme entry points are set at appropriate levels. While cat premium rates are now getting to attractive levels, we don’t want to be growing cat positions only to have to cut-back if the cycle were to turn.
We are committed to managing volatility, but this doesn’t equate to taking less risk. Portfolio optimisation is everything within reinsurance and our focus is on taking risk, in a deliberate way, ensuring diversification by product, geography, industry and client to help reduce the risk of an outsize loss from any single event.
Rebalance is critical; property remains a key part of our proposition but, by careful growth of non-correlating portfolios, we have reduced property to less than a third of our book. We recognise the value of our property capacity but we’re deliberate in how we deploy it. For example, this may mean prioritising those cedants who are also able to provide us with access to diversifying products such as casualty and specialty.
For our casualty programme portfolio management is front of mind again. Our focus has been to find cedants with a great track record for cycle management, well diversified portfolios and not reliant on a single income stream, and who are happy to share high quality exposure data.
We want to feel comfortable supporting them across the cycle and like everyone else, we are carefully monitoring D&O rates and would be prepared to withdraw capacity if we don’t feel cedants are doing the right thing.
As the global insurance market increasingly digitises and automates it’s becoming possible for us to gain a real-time view on our exposures. It’s essential that we fully leverage this capability so that we can continue to make well-informed decisions at major renewal periods.
This is also key to our retro partners. We see our retro supporters as genuine partners and I want us to increase the pace with which we can share our exposures with them so that they too can optimise their own portfolios.
We are already seeing cedants increasingly leverage technology, including drones, to get a better handle on loss estimates post events and I feel we can also increase the sophistication with which we land early estimates on losses.
This article first appeared on 10 September 2023 in The Insurer