Made by buyers, for buyers UnipolRe sets itself apart in a crowded market

As the re/insurance industry enters its first true hard market in almost two decades, all reinsurers will be re-examining their priorities and what sets them apart.

In the case of Dublin-based UnipolRe, it will be reminding cedants of its values and what sets it apart and central to this is the mindset of those that formed it.

The company, formed in 2014 by Italy’s Unipol Group with with €500 million of dedicated capital, is spearheaded by executives with reinsurance buying central to their CVs.

Marco Sordoni, its chief executive, is still the buyer for the Unipol Group, placing €1.9 billion of coverage annually. Simon Wigzell, its chief underwriting officer, in addition to gaining many years’ experience in the London Market, was previously the reinsurance manager of the Fondiaria Sai Group of companies.

Wigzell tells Intelligent Insurer that the ability to see the buyers’ perspective has been central to the company’s philosophy and the way it operates. This approach, combined with the company’s strong technical and analytical abilities, has led to be its becoming a trusted partner on programmes, even though its size means it rarely leads them.

“We knew that, due to our smaller size, we would have to be different, we would have to innovative, from the start,” he says.

“Our experience on the buying side informed this approach and still does today. We work closely with many of our clients, looking at the structure of their programmes and the most efficient way they might structure their reinsurance.

“That is unusual for a player of our size, but it means we have very deep relationships with our clients as a result.”

Seamless approach
One way this approach translates into reality is how UnipolRe offers clients holistic solutions, encompassing all their lines of business, as opposed to working in silos as many bigger reinsurers do. Wigzell explains that the reinsurer always prefers to sit across an entire programme, rather than picking and choosing certain lines or layers of business.

“We never want to talk pricing on individual layers, we discuss areas where we can mitigate pressure across an entire programme. The bigger reinsurers resist that approach, they have different teams for different lines of business, but by seeing the whole picture, we can often accept that a premium that is higher for one side can subsidise another part of the busines.

“We analyse only the full ceded profit rather than individual lines, so we can cross-subsidise performance as required,” he explains.

When he worked on the buy-side, Wigzell learned that the overall profitability on global programmes often outweighed individual undertakings. On this basis, picking and choosing lines on a programme mitigates diversity and can lead to losses where certain lines do not perform well.

“We are one of the few reinsurers that truly look at things in this way,” he says.

UnipolRe is unusual in that its underwriting, actuarial and risk management teams all work as one unit, offering clients a seamless service. He says that allows the company to offer advice and analytics in a fairly bespoke way and it can sometimes lead to the suggestion that clients should be buying less coverage.

This is partly because of an innovative capital management tool the reinsurer has developed. Smart Capital Management Solutions (SCMS) has been developed in recognition of the growing importance of capital optimisation within companies, especially since Solvency II came into force, and the increasing complexity of capital management strategies.

Wigzell says that capital efficiency is increasingly a differentiating factor in the reinsurance marketplace but this often causes brokers and reinsurers a conflict. If a cedant buys less coverage, they get paid less.

For UnipolRe, however, as a smaller player on most programmes, this is less of an issue in contrast with the benefits of gaining the trust of a client.

“It is rare to see anyone advise a client to spend less but we are very transparent and offer a purely technical opinion,” he says.

“We are not a programme leader but we are a trusted adviser to our clients. That gives us an unusual traction with the cedant. We have a much closer rapport as a result, which is very positive.”

In the context of the hard market, he says he is expecting a slow swing towards improved pricing that might last for four to five years. That is partly because of the multiple factors driving harder rates apart from COVID-19 losses, including several years of cat losses, low interest rates and depleted reserves.

“Gradually, competition will increase as rates move up but I believe the improvement could still last for several years,” he says.

A people business
UnipolRe is a great advocate of the use of technology and analytics, but Wigzell stresses that in spite of the increased use of automated solutions in the industry, it remains a people business.

“Better data and analytical tools are fantastic, but reinsurers still need the right people to use them and interpret and use that information,” he says.

The reinsurer has an advantage in this area too because of its close links to its parent in Italy. As technology transforms elements of the primary side of the business, its parent is very close to the ground on such trends and can feed its reinsurance arm what is likely to happen in the future.

“One of the advantages we have is that our parent has its ear to the ground on the direct market and we can translate a lot of that information for the benefit of our cedants.

“Reinsurers are almost the last in the chain of risk and thus often the last to find out about new trends. We are ahead of the game, however, because of our parent,” Wigzell says.

Its technical knowhow came in helpful during lockdown restrictions imposed around COVID-19. He says that as a relatively young company, a high level of connectivity and remote coverage has existed since its establishment. It, therefore, enjoyed a smooth transition to working remotely during the pandemic.

“We feel we interact with our clients more than ever, both internally and externally,” he says.

“With an Italian parent, we had advance warning around what was coming and we were able to act early before lockdown even happened in Ireland.

“We are a small, agile and flat organisation something that also stands us in good stead.”