Inside View - Why the current crisis of confidence in reinsurance matters to you.

(From Reinsurance)

Byline: Nick Goulder is international director of casualty at Willis Re.

This year's post-renewal season debriefs were particularly interesting when it came to the open debates that we held with some of the reinsurers. My impression in the past has been that these meetings have tended to operate actively more at senior level than at any detailed level. However, this year I detected a real interest from the leading reinsurers in feedback as to how they were performing at a detailed level. Were they consistent? How did they match up against their peers for coverage, for price, for service? We enjoyed several vibrant meetings along these lines, with reinsurers avid to improve their client proposition.

The gradual consolidation of the reinsurance market (despite the best efforts of numbers of Bermudians) was leading me to fear a little for the quality of the reinsurer product. Not a bit of it, in this context at least. It was heartening that the reinsurers seem to have grasped more than ever how critical the client-broker advice relationship has become in determining prospective buying strategies. Hence, the reinsurers are becoming more broker-responsive. Indeed, we were chuffed at some of the 'criticism' levelled at us - one reinsurer told us that we were "too client-protective". This is feedback that we can certainly live with!

What seems key to me, however, is that reinsurers take this principle a stage further. It's all very well to get together to discuss business development issues, and there's no doubt that these meetings have real value. But how far are reinsurers interested in taking that debate to its logical conclusion?

The crucial issue facing most buyers in reappraising their strategic outlook on reinsurance is just who their counterparty is, and what credit risk they face in entering into a reinsurance transaction. Every reinsurer is feeling the pressure at a theoretical level, and many of them have altered their outward perceptions toward the rating agencies beyond recognition in the past five years.

The clients have been casting a shrewd 'weather eye' across the range of choice they are faced with, and the sparkling lights of triple-A and double-A reinsurers of a decade ago have metamorphosed into a much less glamorous glow. With the shrinkage in the number of quality counterparties has come a shrinking in the choice as to coverage and price. The old open field of many appealing reinsurance products has transmuted into a restricted world where customers are asking some very hard questions about whether they want to contemplate anything ...