Not all reinsurers are created equal

Flaspöhler (part of NMG Consulting—a specialist global consulting firm which focuses on the investments, insurance and reinsurance markets) conducted a global study drawing on the views of nearly 3,500 executives from more than 1,200 companies.

Flaspöhler | NMG Consulting produces a Business Capability Index (BCI) as a lead metric, designed to provide insight into a reinsurer’s (or broker’s) competitive positioning within any given segment. The BCI is a composite of many factors, including strength of partnerships, ease of doing business, innovation, client management, underwriting expertise, and capabilities within lines of business.

The BCI gives a sense of a competitor’s overall offer and value proposition in relation to its peers, and is particularly insightful when contrasted against relative pricing or financial strength. Price competitiveness and financial strength are not included in the BCI, which ensures it is strictly a value measure.

The results may be eye-opening. The BCI charts show a strong correlation between value positioning and market penetration—perhaps a sign that customers prefer to work with capability-laden reinsurers.

Flaspöhler | NMG Consulting stresses that a BCI is a snapshot at a moment in time, although it can also be used to track changes over time. Those competitors with high BCI ratings can—under ‘normal’ conditions—reasonably be expected to trade favourably, whereas those less well-rated by customers would typically need to rely on price differentials and/or superior financial strength to hold ground competitively.

Rick Flaspöhler, partner and co-author of the research, says this is significant in the context of the excess and alternative capital sources that have meant that soft market conditions continue to dominate the insurance world in 2017.

“While the large reinsurers have held firmer in pricing and underwriting, reinsurers have also had to compete on factors relating to value—these days attractive prices are available from most competitors,” he says.

“Ease of doing business, good partnership credentials and access to trusted underwriters are leading factors in the selection of reinsurance partners for insurers and brokers in EMEA. In addition, the technology revolution in insurance (insurtech) has gained significant momentum, and there are value chain pressures stemming from disintermediation.

“It’s unsurprising that insurers are looking to reinsurers for innovation and ideas on how to compete in this brave new world.

“As they adapt to cope with rapidly evolving customer demand, how are reinsurers faring? Are their strategies and efforts paying off in terms of delivering to insurers and brokers what they really want?” Flaspöhler concludes.

How EMEA brokers rate reinsurers

For this part of the study, Flaspöhler | NMG Consulting interviewed more than 173 reinsurance brokers across Europe, the Middle East and Africa (EMEA) and used this feedback from brokers to calculate a Business Capability Index (BCI) score for each reinsurer.

From this feedback, it was clear that Swiss Re is viewed by brokers as being the leading value competitor, as well as the most important (measured by number of brokers actively using Swiss Re). Swiss Re rated well ahead of its traditional peer group in this study cycle.

Several other competitors received high BCI ratings from brokers in EMEA, most notably SCOR, Hannover RE, Munich Re, QBE Re, Validus and RenRe—although some of these were low on market penetration.

Flaspöhler | NMG Consulting conduct this study annually. They are now interviewing key insurer and broker executives to continue to assist reinsurers and brokers in delivering top-notch customer service to customers and brokers alike. If you would like to find out more about the research, contact: rick.flaspohler@nmg-group.com

How EMEA insurance executives rate reinsurers

For this part of the study, Flaspöhler |NMG Consulting interviewed more than 703 insurance executives across Europe, the Middle East and Africa (EMEA) and used this feedback to calculate a Business Capability Index (BCI) score for each reinsurer specifically in relation to treaty business.

BCI results generated by insurance executives were more clustered for the leading reinsurers. Four distinct reinsurers were visible on penetration and a top three on BCI.

Swiss Re was again top rated by insurers, followed by Munich Re, Hannover Re and SCOR, which all scored highly for both market penetration and BCI. Though lower on market penetration, Gen Re, Nacional Re and VIG Re also all scored well.

Digital transformation a top concern of insurers

As part of the survey, Flaspöhler asked respondents about their main concerns in a rapidly changing industry. Here, we reveal the top challenges for insurance executives across Europe, the Middle East and Africa (EMEA).

As part of most recent study, Flaspohler | NMG Consulting asked insurance executives across EMEA to provide their view of the ‘greatest challenges’ facing their industry (and thus their organisations) today.

Digital transformation emerged as the leading challenge for insurers in the mature markets of continental Europe, and particularly in Germany, France and Spain. Insurers in these markets appear to be ahead of the curve in digesting the reality of a more digital future.

The backdrop of concerns relating to ‘excess capacity’ and ‘falling prices’ was unsurprisingly prominent, although at levels below those currently seen in the US, Canada and Asia. Brexit was mentioned as a concern by UK insurers, although concern about excess capacity and regulation dominated.

Concerns relating to the performance of eurozone economies, captured as ‘general economic outlook’ were noticeable compared to other regions (excepting Latin America, where these concerns were strongly voiced in the markets of Brazil and Argentina).

‘Innovation’ in response to changing and highly competitive markets was mentioned by many insurers as were both the limitations imposed by legacy technologies, and the opportunities presented by new innovative technologies.

It would appear that technology itself is set to be a leading source of competitive advantage in Europe.

The word cloud (shown above) provides a unique high-altitude perspective, that draws out common themes in an aesthetic which is easy to digest. The more often a word/phrase is used by respondents, the larger it appears in the cloud.

While word clouds can never provide the statistical accuracy of coded and counted responses, they can illustrate subtle differences between answers of similar but different responses, as well as provide helpful insights into the overall tone of responses.

For readers who prefer a more traditional way of viewing the information, we have also supplied a bar chart (Chart 1).

Innovation a top concern of brokers

As part of the survey, Flaspöhler asked respondents about their main concerns in a rapidly changing industry. Here, we reveal the top challenges faced by reinsurance brokers across EMEA.

As part of its most recent study, Flaspohler | NMG Consulting asked reinsurance brokers across EMEA to provide their view of the ‘greatest challenges’ facing their industry (and their organisations) today.

Innovation emerged as the top concern, an answer likely prompted by the insurtech revolution the industry is grappling with. Many innovations have the potential to cut brokers out of the loop in some instances, perhaps explaining this concern.

Innovation is clearly of top of mind for brokers with areas of focus including new solutions for clients, new product offerings (keeping pace with changing needs and demands), and the potential for new analytical models and data usage.

In addition, reinsurance brokers are experiencing margin reductions due to declining premium-based revenues, and reductions in the current and potential client universe as a consequence of consolidation. As a result, they are also very concerned about excess capacity, the soft market, and pricing.”

The word cloud (shown right) provides a unique high-altitude perspective, that draws out common themes in an aesthetic which is easy to digest. The more often a word/phrase is used by respondents, the larger it appears in the cloud.

While word clouds can never provide the statistical accuracy of coded and counted responses, they can illustrate subtle differences between answers of similar but different responses, as well as provide helpful insights into the overall tone of responses.

For readers who prefer a more traditional way of viewing the information, we have also supplied a bar chart (Chart 2).