The imperative of robust communication in reinsurer relationships with clients and brokers
Liberty Mutual Re’s Dieter Winkel and James D’Onofrio outline the benefits of clear communication between all parties in the value chain.
In the ever-evolving world of insurance and reinsurance, the importance of effective communication cannot be overstated. The cornerstone of a successful relationship is trust, which can only be achieved through open and honest dialogue.
Recent years have brought a host of significant challenges to our business. Elevated attritional and catastrophic loss activity, economic and social inflation, prior period loss development and the growing problem of legal system abuse in the US have all contributed to lackluster, if not poor, industry-wide returns. Better performance will be essential if the industry is to attract new capital and new talent to provide market stability and sustainable solutions to businesses and customers everywhere.
Reinsurers need to communicate their strategies and risk management approaches clearly to their clients and brokers. At the same time, clients and brokers should provide timely and accurate data and insights to help reinsurers better understand and price the risks they are underwriting. This reciprocal flow of information is crucial for making informed decisions and optimizing risk management against the backdrop of persistently low returns.
Effective communication helps all parties involved understand the broader market dynamics and adapt to changing conditions. With this knowledge, reinsurers can develop solutions that are both profitable and sustainable in the long term while providing the required coverage and value to our clients. Failure to communicate effectively may result in misaligned expectations and, ultimately, negative financial outcomes on either side of the transaction.
Lessons from 2023
During last year’s renewal cycle, disorganization and last-minute decision-making across the market was evident. This heightened uncertainty on both sides of the transaction made for a long December, culminating in a renewal that benefited no one. Today we see continued firm conditions on the property side, but an uncertain casualty market due to the factors outlined above. Carriers must be vigilant in their efforts to keep primary rates ahead of loss trends. Meanwhile, there will be pressure to improve casualty treaty terms in view of past performance and the question marks around current rate adequacy. In many cases, continued improvements in reinsurance terms will be necessary to maintain reasonable profit expectations as we project into 2024.
We are all looking forward to a more orderly renewal this year and conversations at the Monte Carlo Rendez-Vous pointed in that direction. It remains to be seen if they continue at APCIA. Despite the changes seen in recent months, the world is constantly evolving and expectations on terms, capacity and price on both sides of the table might still differ. Therefore, constant dialogue between all parties involved is as important as ever.
The benefits of transparency in the reinsurer, client and broker relationship may be obvious but warrants repeating. Enhanced decision making, a climate of trust and symbiosis, operational efficiency, and improved and better-tailored risk transfer solutions all come to mind as advantages of open and effective dialogue. Additionally, pollination of market intelligence, innovation and sharing of ideas come across as added benefits. We always wish to avoid disagreement, but conflict resolution is also made easier when both parties have established a broad institutional relationship based on trust and the ideals expressed above.
At LM Re, we place the highest value on strong and transparent relationships so that together we may successfully navigate the complexities of today’s world. We are committed to the early communication of our positions and perspectives, so that our brokers and clients can adjust and adapt as may be necessary. While flexibility is key, our commitment as a dependable partner remains unwavering.
The communication challenge of the future reinsurance paradigm
Looking ahead, the future reinsurance paradigm calls for a partnership where all parties align their understanding of coverage, risk appetite and objectives through clear and timely communication, supported by a robust, data-driven information exchange. In an environment where adaptability and creativity are pivotal, client and broker relationships should be anchored in transparency, reliability and trust.
At LM Re, our experience equips us to guide partners through a range of challenges across various product lines and markets. We are well positioned to navigate the transition with the agility to act quickly and the expertise to develop solutions for our clients.
Dieter Winkel, president, and James D’Onofrio, head of US region, Liberty Mutual Reinsurance