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Friday 10 September 2010
Author: Russell Group

The rise in regulatory rules, the increased complexity of the risk market is seeing a raft of new opportunities for the reinsurance market, according to professional services firm Towers Perrin.

Speaking in Monte Carlo for the annual Reinsurance Rendezvous the firm said it believed the growing complexity of reinsurance structures in recent years had ramped up demands on buyers and radically transformed the industry.

It added complex market data, Solvency II implementation, the dual challenges of accessing risk and distributing risk taking are generating the need for reinsurance buyers to achieve a holistic view of capital adequacy in order to invest for future profit and growth.

Ross Howard, Chief Operating Officer Europe of Towers Watson’s reinsurance brokerage, explained: “New market opportunities are emerging in spite of exceptional regulatory and political intervention and the market is undergoing more consolidation. A wide range of pressures has created a landscape that looks very different from that of only a few years ago. In this post-consolidated world, reinsurance buyers can derive huge benefits by working with brokers who are more prepared than ever to deliver a more integrated and complete service offering.”

Towers Watson said it now saw four core trends within the market for the rest of the year and beyond.

In terms of the growth of a Holistic risk perspective the firm said there was “a fundamental change in the nature of reinsurance purchasing, primarily driven by Solvency II, is prompting insurers to consider a wider spectrum of alternative structures”.

More rigorous testing and validation of the reinsurance buying process were now determining its benefits compared with prior forms of solvency provision, while barriers to technology are falling as cutting edge software is forged by innovative broking houses outside of the ‘big three’.

It added there was now a real shift in how the intermediaries were viewed.“Major international brokers will increasingly focus on improving their use of complex market data regarding placement of risk to provide specialised expertise to find the best price and terms in the market,” said Towers Watson.

According to the firm “in a world of increasingly unpredictable risks and challenging regulatory requirements, brokers now find themselves well placed to provide a sophisticated and reliable market overview of reinsurance purchasing, as well as to act as risk adviser and obtain better terms”.