As the market hardens, NewRe eyes growth in Europe

The hardening market has presented New Reinsurance Company (NewRe) with opportunities to grow its business in two major European countries, according to the firm’s chief underwriting officer for the non-life business Dirk Herrenpoth.

As the virtual Monte Carlo began, Herrenpoth said the renewal season ahead was very important, adding that the reinsurer has a robust strategy in place to manage the process.

“The strategy has proved successful if we look at our recent performance. We are going into this hardening market in a position of strength, so there’s no need to clean up our portfolio first or withdraw from certain classes of business.

“It’s a favourable market from a reinsurer’s point of view,” he told Intelligent Insurer.

NewRe has always had a very strong bottom line focus, he said.

“We don’t do top line just for the sake of generating top line. We have reduced our top line where we felt business was no longer meeting our profitability targets.”

He said the company has not grown its business in the soft market, but it has protected the bottom line “and that is more important for us”.

When the firm had pulled back from top line business it had been in property cat excess of loss (XL).

“In that area we have managed the cycle rigorously. Where we do not see the returns we need, we walked away from business or reduced our shares,” Herrenpoth explained.

“Having said that, the market is now turning again and we are very well positioned to take advantage of the currently improving market.”

He agreed that the pandemic has contributed to the hardening market, but he added that the change had happened after years of reducing prices, attritional loss creep, social inflation and a very low interest rate environment.

“The pandemic gave the final goal for the market to harden.”

Prior to the market changes, even in NewRe’s main geography, continental Europe, it has been very difficult for reinsurers to get the returns needed in recent years, he said.

“From a NewRe point of view our overall exposure to the pandemic is very digestible. Having said that, we have never had an appetite for pandemic exposure and we will not have an appetite for it going forward.”

Broad portfolio
Herrenpoth pointed to the firm’s relatively broad portfolio as a positive in light of the general trend of hardening across all lines.

“This means we can grow our business across all classes of business that we write. We have capacity available, we have not cut back core capacity, so we are in a position where we can seize opportunities if they arise, be they on the casualty or on the property side.”

However, Herrenpoth said, as an underwriter he would be more cautious about D&O against the backdrop of the pandemic.

“No-one knows exactly what 2021 and a recession is going to look like or what impact it will have on the total economy,” he added.

With available capacity, NewRe has the option to grow in the property cat XL space.

“Here we see some opportunities in the market and we have the capacity available but it’s not like we could say ‘we just want to grow here or there’.

“In terms of geographies, if I look at our mainly continental European client base, I think we are a bit light in France and Germany, so here I could see an opportunity to strengthen our market position.”

Herrenpoth said he expected to see growth in the next six to 12 months and beyond that to the mid-term.

“In the mid-term there is potential, especially when we talk about Germany and France, that we can be a bit more heavily weighted in those markets.

“We won’t do crazy things or things that will just grow our top line because we want to grow in a certain class of business.

“We will do everything based on our current strategy, which has proved successful,” he concluded.