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Pre-Baden Baden Review

Jonathan Morris, Managing Director of the BMS Retro team, considers the hot topics for debate at the upcoming Baden Baden Meeting.

I have been going to Baden Baden for the last four years and although relatively internationally focused, it has become an increasing important conference where after the early discussions of Monte Carlo Rendez-Vous; we finally get down to business and focus on client/contract specific topics. This concentration of market players in one location all with a focus on the renewal season ahead, to my mind makes Baden the real beginning of the new season.

BMS Re will be represented this year by myself and Georgina Glander. We will be hosting meetings between our clients and their markets. We also plan to see other existing and potential retro markets form Europe, Bermuda, Barbados and Scandinavia. These markets include hedge funds as well as traditional reinsurance.

I think the key discussions at Baden Baden will be focused around the poor results relating to the sizeable losses experienced in New Zealand and Japan earlier in the year and how these losses will impact throughout the market and potentially drive change. It is obvious that it will take more than one year to recoup such exceptional losses and to get clients’ portfolios back into the black.

Capacity is always a hot topic and this year talk will be around whether traditional or less-traditional forms of capacity emerging from capital-based market will be used to complete programs. These new players in the retro scene are good for clients, as a buyer they need a mix of traditional and capital markets to try to smooth out any volatility in pricing each year. There is an increase in choice for clients overall, be it Insurance linked securities (ILS), Industry Loss Warranties (ILW), traditional cover or capital markets.

In terms of the retrocessional market, it is early days regarding 1/1 renewals, but Baden will set the scene for the latter weeks in December when the decisions are made. Our biggest competitors are ‘net retentions’ and deductibles. For me, if retro reinsurance is too expensive; people will buy less of it and stay out of the marketplace for longer, which is not what we want.

I foresee loss reporting from cedants as growing concern for reinsurers and their retro reinsurers. Earthquake losses, in particular, take a long time to gather reliable data from, so both the Japanese earthquake and New Zealand have taken a long time to get accurate loss estimates to base any sort of pricing around.

Overall it is definitely going to be a tough renewal season for all concerned and I believe the above themes will dominate the industry conferences for some time to come.

The 3rd Annual Reactions North America Conference, Risk and Capital Management Issues, New York, September 27th 2011

There were some stimulating panel discussions at this conference, the highlight being the CEO panel, which had a great line up. I particularly enjoyed all the discussion around “when will the market turn.”

One panel member described the market as a “not yet” market, that there have been pockets of change but nothing has as “yet” had enough impact. Another panel member cautioned us about blaming others/other industries for our results.

Of obvious interest to me, as EVP of BMS’ Specialty Casualty team, was when one panel member expanded on the casualty market commenting that the casualty business looks surprising good – in spite of the depressed rate levels.

I also enjoyed the CFO panel where one debate focused on the benefits of reinsurance and whether or not it is felt the capital markets sector will displace the demand for reinsurance. One panel member was quick to comment that reinsurance does more than provide capital for their company, that it helps to de-risk as they build a diversified book and they value the reinsurance partnership with key players in the industry.

The keynote speaker raised some valid discussion points when he pushed thinking around the question; “Are we driving people/companies out of the market?” based upon the increased retentions. Furthermore, he talked about growth opportunities in this challenging market and how the real money is in the “specialties” (Practice Groups by Industry/Product). He concluded with the fact that opportunity lies in differentiated talent, that the focus of companies, needs to be on obtaining the best talent – then lead, motivate and retain them.

The MPL Market – What’s the Prognosis?

Since 2006 the Medical Professional Liability (MPL) market has become increasingly competitive, but it remains both healthy and profitable, particularly when compared to other casualty lines. The key challenge faced by the Physician Insurers Association of America (PIAA) member companies is whether they can reverse the declining trend in profitability before the market hits the unprofitable levels experienced in the early 2000’s.

BMS’s recent analysis looks at the results of PIAA member companies (who make up more than 50% of the MPL market) from 2001 – 2010 to look at where results have been and where they might be heading.

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BMS expands its analytics team with two new senior hires

Independent global broker BMS Group today announces that it is continuing to invest in its analytics business with the appointment of two industry experts:

  • Julie Serakos, Executive Vice President, Catastrophe Modelling
  • Mike Larson, Executive Vice President and Actuary for BMS Intermediaries

Julie will join BMS this week to lead the Catastrophe Modelling department.  She joins from Willis Re where she built up the company’s catastrophe risk modelling and advisory services business becoming the Executive Vice President in their Property Resource Division.

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