Allianz looks to finesse manmade risks placement

Allianz is pleased with how its property-catastrophe reinsurance programme responded to the 2017 losses related to hurricanes Harvey, Irma and Maria (HIM) but it is still refining the way it covers manmade risks in its portfolio, Amer Ahmed, CEO of Allianz Re, which handles the insurer’s reinsurance buying programme, told Monte Carlo Today.

“We don’t have a huge amount of exposure in the US, but the 2017 losses were a good test,” Ahmed said. He added that losses stemming from exposures in the Caribbean went through its $100 million retention into its reinsurance programme, but losses in the US did not exceed the $200 million retention it has in place there.

For manmade risks, however, it is finessing a programme designed to cover it in the event of accumulation risks associated with a manmade event such as the 2015 explosion in Tianjin in China, which triggered claims on many lines of business, from property to marine.

“We continue to evolve that programme at a group level—we want to manage our accumulation risk,” Ahmed said.

“The core of the programme is in place. We have the structure but we need to establish at what level the retention should be.”

He said Allianz now works with around 30 reinsurers—many fewer than it once did; it also buys less reinsurance than in years past. This change occurred when it centralised its reinsurance management within Allianz Re.

“Our balance sheet is stronger; we have fewer, broader relationships,” he said.

Its panel represents a mixture of traditional players and providers of collateralised capacity. Ahmed said the insurer is agnostic to the form of capital used.

“It is more important to us that they understand our portfolio and its underlying risk, and what we are hoping to achieve,” he said.

Asked if consolidation within the industry is a concern, he said Allianz keeps an eye on concentration risk within its portfolio but that it also depends on a much wider range of factors such as the financial strength of the remaining entity, and whether that concentration risk becomes uncomfortable.

He acknowledged that after the losses of 2017 there was an expectation of a stronger impact on rates, which was muted in the end. But, he said, the key to whether a correction is needed should be based on whether losses are within the range of expectations.

“If they were, and the original price was reasonable, there should be no change,” he said.

“If the loss was unforeseen or the pricing was inadequate, that is different. In our case, pricing was reasonable and the losses foreseen.”