World of opportunities
Beatrix Hartinger, CUO property and engineering, facultative reinsurance, Munich Re
With cedants taking a more strategic approach to buying reinsurance, fac reinsurance will play a more significant role in getting deals over the line, says Beatrix Hartinger
What was your career path to your current position, and what does your role cover?
With more than 25 years in the reinsurance business, both at Munich Re and Swiss Re (Germany), I have held several positions on the corporate insurance side and also on the reinsurance side.
For a large part of my career I focused on the North American market, including a two-year secondment to the Munich Re Chicago office. To broaden my background and learn more about the reinsurance side of our business, I decided two years ago to run the facultative property and engineering reinsurance team for Europe and Latin America.
The formation in July this year of a new single risk unit, Munich Re F&C, gave me the opportunity to take over the chief underwriting officer role for the global facultative property and engineering book.
It includes responsibility for global underwriting strategy and risk appetite, collaboration with local teams and also underwriting responsibility for European, Caribbean and global clients of Munich Re.
What is your outlook for fac pricing and buyer appetite over the next year?
Overall, the demand for reinsurance coverage remains unbroken, albeit driven by different motives. While some cedants focus on protecting their bottom line by reducing earnings volatility, others reinsure against single large losses with high return periods. On the supply side, there is some consolidation in the sector.
Together with other factors, like ILS capital and interest rates, this has led to rate increases across several lines of business even for loss-free covers.
Overall, Munich Re is observing a widespread shift towards greater discipline in the market, which is positive, and increased focus on improving terms and conditions.
In market segments where we see firming rates, we expect the momentum of price increases and tightening conditions to carry on through the 1 January renewals.
It also should be said that we are only making up for several years of rate decreases step by step, and look at every piece of business individually and on its own merits. We have also had technical discussions with clients and brokers in past years, and they know how we looked at rates and where we compromised for soft market terms.
What would you say are the key factors driving fac pricing going into 2020?
We observe an increasing trend towards lower risk and broader diversified strategies. This leads to adjusted underwriting strategies and risk appetites for some companies, simply based on two or even three consecutive years of under-delivery and losses of capital.
New capital is coming in, but we don’t see it providing enough capacity to stop the firming. Overall, we observe a broader awareness that rate levels need correction.
In what classes of business do you currently see viable opportunities for underwriting facultative facilities?
Especially in property and casualty we see these opportunities, however always around a clear frame and always on a limited delegated authority.
Major cedants appear to be changing their centralised approach to reinsurance buying. Have you seen any evidence of fac purchasing decisions being devolved to a regional or local level?
There is no clear observation, especially on the large global insurance companies where we still have a diverse picture. Some are centralising and steering the facultative reinsurance buying out of one team, while others are leaving it within the regions.
What can be said is that all companies are taking a more strategic look at how they buy.
What are the biggest areas for growth in terms of emerging risks for fac?
Cyber overall is one of Munich Re’s main strategic growth areas. While we focus more on treaty and insurance business for cyber right now, on the facultative portfolios the growing exposures will also provide significant opportunities.
Losses caused by wildfires in California have increased in recent decades, mostly due to the increase of values in high hazard areas, but probably also due to a changing climate. For California, Colorado and Arizona wildfires we have developed a new risk score map to support clients, customers and insurance companies in identifying and managing wildfire risk. So far, we haven’t seen significantly higher demand on the facultative side. However, we are prepared to assess the property exposures and help our clients with solutions.
Where we see an increasing trend is parametric solutions. The advances in technology enhance the ability to shape customised triggers and we will have discussions with our clients for any type of event. However, the main discussion areas are still earthquakes, floods and hurricanes, although non-damage business interruption should stay on our watch list, as we see more and more requests and deals for such cover.
Independent from emerging risks or exposures, I am convinced that fac reinsurance will play a more significant role in structuring and filling insurance deals.
What are your plans for growing the fac book into 2020 and beyond?
With geographies firming and rate levels improving in many areas, we will focus on these segments. We see a higher demand for quality reinsurance capacity and we will make sure that we work with our clients on solutions where they need us.
Business we haven’t worked on that much or which has had disciplined capacity in past years and where rates are now improving, are areas that we will go after more actively. We have already started discussions with our brokers and clients about accounts and segments in those markets.
A world of risks is a world of opportunities for us.