PartnerRe looks long-term under new structure

PartnerRe has refocused its business model globally and also tweaked the structure of its North American business since it was acquired by Italian investment company Exor last year. All its changes will benefit clients, Greg Haft, executive vice president and head of global cat and head of property North America P&C at PartnerRe, told PCI Today.

Since the takeover, the reinsurer has abandoned previous initiatives to move into primary insurance, preferring to operate as a pure-play reinsurer and not compete with its clients. It has also stressed that being privately owned also allows it to pursue long-term goals and relationships as it is no longer judged on quarterly earnings, as publicly listed companies are.

He said this means it can develop deeper relationships with clients. “Our shift to private ownership puts us in a strong position,” Haft said. “It gives us a unique long-term view. For Exor, a family-controlled company, we represent a ‘generational’ investment.”

Haft said he is very positive about the future under its new ownership. “PartnerRe is well positioned and our owners have a long-term view,” he said.

“As such, we expect to have strong partnerships with our clients over the long term. We are no longer looking at success in a given quarter—we now look to measure success over a quarter of a century. We have an exciting future ahead and look forward to 2017.”

In North America, the firm has brought catastrophe and property/casualty business under the single leadership of Dick Sanford—something, Haft said, that allows PartnerRe to respond more holistically to its clients and brokers.

He said that in PCI, he expects the recent hurricanes Matthew and Nicole to be big talking points mainly due to the fact they were so recent, but he said neither will have a big impact on the market.

He also praised the way Bermuda recovered so quickly in the aftermath of Nicole and said other countries can learn from this.

“Matthew was less of an event than it could have been. What was amazing to me was the way that Bermuda dealt with the Nicole. It was a direct hit as a Category 3 storm and yet the damage was minimal. The Island was up and running again by the next day,” Haft said.

“The building codes and regulation in Bermuda are partly responsible for this. Other countries should take note and take a look at their own situations when it comes to building regulations.

“The Insurance Institute for Business & Home Safety and other organisations like it have been working to increase awareness of how proper construction can lead to reduced losses, and more importantly, save lives. But outside Florida, not enough has been done to enforce a superior building stock and even there it can be improved.”

Haft said Matthew had the potential to be a market-changing event but, thanks to its eventual path—only skirting Florida and weakening before landing in South Carolina—it will now be largely a retention event for Florida insurers.

As such, the insurance-linked securities (ILS) market was unaffected. Haft said if Matthew had been larger, there could have been losses and it would have been interesting to see whether investors would have been willing to immediately re-invest and again offer coverage to that market.

“That collateral could have been tied up or frozen in the event of big losses meaning ILS players would have needed to find another amount to renew that deal. If the event was large enough to trigger release provisions, an investor can’t use the money to roll over to a new deal. They would need to find additional money. This uncertainty is leading some buyers to return to the proven security of rated paper.”

Looking at the re/insurance landscape as a whole, Haft said the market is still soft, but that there were signs of firming in the June and July renewals. He believes that reserve releases are now drying up and this could force a change in the market.

“Everyone understands we are in a soft market and most people, including myself, believe we are at or near the bottom right now. A combination of things could change the market. A couple of recent earnings releases have shown less favourable reserve development than has been seen in the last few years,” he said.

“If earnings from favourable development begin to dry up, it will begin to harden the market. A large catastrophe event, which Matthew seemed poised to be just two weeks ago, could potentially change the market.”

He added that other forces could prompt a change. While it seems unlikely in the short term, he said interest rates must increase at some point.

“If it is rapid that too could be a catalyst for change. A combination of these factors would certainly harden the market, and if all occurred there would certainly be a major change,” Haft said.