QBE will manage reinsurance spend with revised buying strategy: CFO Singh

Australian re/insurer  QBE will seek to sidestep rising reinsurance rates by revising its approach, eschewing broad coverages in place of targeted strategies designed to protect the balance sheet and better manage cat-related volatility, CFO Inder Singh told an industry seminar.

Rate increases may be justified in some cases, but they won’t always prove achievable across all segments and markets, he warned, based purely on the reality of what clients are willing to pay for coverage.

“We can continue to say that the risk is increasing, so maybe we should continue increasing prices…but the reality is that around the world we will find places where there is problem with affordability,” Singh said during S&P’s Global Reinsurance Conference, which took place this week.

While he stressed that, long-term, the industry will look to be more pro-active investing in loss prevention and mitigation measures, QBE is also looking at more immediate ways to reduce its total reinsurance spend.

Asked if QBE was tempted to reconsider its total reinsurance needs, Singh admitted: “We think about this quite a bit. We haven’t been spending more on reinsurance, we’ve been structuring programs differently.”

He said its buying strategy has evolved to focus more on balance sheet and capital preservation, as well as earnings volatility. He added that the global nature of its business also gives it a natural diversification. “That has worked well for us and for our reinsurers,” he said.

He also noted how much it values long-term relationships with traditional reinsurers. He said this means it is unlikely to embrace alterative capital in a big way but remains “very open” to alternative solutions in “targeted” market spots.

He added that the support of reinsurers is always welcome where the insurance market develops new products such as coverage around intangible assets, including intellectual property, as well as in segments such as health sciences and tech.

“As an industry we focus a lot on the physical risks and the tangible assets, but when we look around the world and at GDP and the companies that are our clients, a lot of their value and their growth is really tied to the intangible assets,” Singh said.

“It’s in these areas of innovation and new product development where reinsurance has a real role to play.” He added that having an early-stage presence can expand risk insights and challenge primary market carriers to find and prove the data behind the risk management.

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