PartnerRe's Goldie sceptical about composites' value for cedants

Large global composite carriers created through mergers do not necessarily meet the needs of reinsurance buyers, PartnerRe P&C CEO Charles Goldie has said.

Speaking at the Guy Carpenter Symposium at the annual Baden-Baden reinsurance meeting, Goldie noted there was a variety of factors pushing carriers towards M&A.

He said running a profitable reinsurance company was more difficult than it had ever been thanks to the presence of third-party capital in the market, which he added was “here to stay”.

But he said: “Will there be a return to global composites? Insurance and reinsurance in a big way under one big happy roof? I am just not so sure.

“We have seen plenty of M&A. It makes for great press and great gossip. But if it is a trend, where will it go?”

Goldie said M&A activity would be driven by buyers’ demands, which will not necessarily be met by a handful of composite carriers writing multiple lines across the primary and reinsurance markets.

He added: “The client partnership is also huge. Trusted partners don’t support your business one year and then turn around and compete with you the next year. And trusted partners don’t hire your best employees.”

He continued: “M&A in the reinsurance space will eventually go where the buyers of reinsurance want it to go – increasingly we see them wanting to concentrate their buying with smaller amounts of reinsurers.

“The willingness and need to fill out reinsurance placements with 30, 40, 60 reinsurers is not there in the way it used to be.”

Goldie said successful reinsurance businesses depended on building up customer loyalty and focus; the provision of a broad selection of products tailored closely to cedants’ needs; and “efficient and effective operations”.

The executive predicted the global reinsurance pool could ultimately shrink to about “five, seven, 10” major worldwide players.

He added that early in this decade, insurers had tended towards buying reinsurance for capital protection. Reinsurance buying for volatility protection was neglected, he noted.

“Capital models held up fine – but capital models were incomplete,” he said.

“If you are not thinking about how shareholders react to volatility you are not thinking at all.”

Reinsurance buyers today place a higher priority on protection against volatility, Goldie said.