As brokers all around the world hurt, reinsurers have a choice – ignore their pain or share it. Liberty Mutual Re’s Miguel Martinez-Alvarez chooses to share it.
“I share your pain.” It’s a well-rehearsed truism that many reinsurers like to wheel out to their broker contacts during times of strife. You’re hurting, therefore we feel your pain. The market’s hardened, available capacity is shrinking, clients need answers so brokers are facing challenging conditions. Reinsurers will, of course, smile sympathetically and nod.
In reality, though, not every reinsurer is quite so willing or able to share in its broker partners’ pain. The size of some major players and the greater volume of direct business in their overall book provides a degree of insulation. For others, though, that pain is at the heart of their business philosophy.
So where does this pain come from? First, putting Covid-19, and the resultant hardening market to one side for a moment, many firms are under financial constraints and are facing a loss of revenue. The virus has suppressed economic activity globally. Some insurance companies have written 30 percent less business than last year in specific classes.
Second, the need to ensure employer and customer well-being has placed additional stresses on brokers’ resources and infrastructures. At Liberty Mutual Re, we were fortunate that our organisation was well-prepared with remote working being instituted quickly and efficiently.
Third, clients and their brokers have had to increase the importance they placed on a reinsurers’ ability to respond in terms of financial stability, business continuity and crisis management. Hardly surprising, when you think about it. What we’ve all experienced in the last six months has placed emergency preparedness at the top of everybody’s list.
For those reinsurers close to their brokers, these pain points will hardly come as a surprise. But not every reinsurer is close to their broker partners.
At Liberty Mutual Re, as one of the newer players on the global stage – and one whose distribution is almost entirely broker-based – our relationship with our brokers is pivotal. Solid, stable and well capitalised players like Liberty increase in attractiveness at times like these. But we still need to understand the brokers’ position and the factors driving their strategy just as they need to understand ours. Clear communication and the shared belief that we can add value to our clients’ businesses is right at the heart of this approach.
A year ago, in the midst of a soft market, reinsurers swapped anecdotes about brokers being able to place programmes at 10-minutes-to-midnight on renewals day. Brokers were able to approach underwriters and if their response wasn’t favourable, then it was no problem to take the treaty to another market. That’s changed now. Today, brokers are striving to fully understand the new environment in which they find themselves and to gain a greater appreciation of their clients’ rapidly evolving needs. Risks aren’t placed on the spur of the moment; there’s tremendous preparation and much greater strategic evaluation of available options. Brokers are stepping up to the plate in a way that’s to be admired.
We are moving away from the long soft market into a new phase in which brokers will play a much more active role in negotiations and risk management. Reinsurers need to respond to this. There’s an increased need for dialogue and for a frank sharing of views. New covers and clauses will need to be clarified and understood as never before. A shared client-focused approach is no longer an ambition; it’s a necessity.
As brokers all around the world hurt, reinsurers have a choice. Ignore their pain or share it. We choose to share it, because being close to our clients and brokers is at the heart of who we are. As we like to say, the feeling’s mutual.