Sebastian Cook on why reinsurance buyers are looking beyond rate with AM Best TV

A softer reinsurance market means lower rates. But for buyers, that’s only part of the opportunity.

Sebastian Cook, UK CEO and Deputy CEO, International, Howden Re, spoke with Sophie Roberts of AM Best TV at the Rendez-Vous de Septembre in Monte Carlo about how buyers can get more value from their reinsurance spend ahead of the 1 January renewals.

With more capacity available and competition increasing, Howden Re is working with buyers look beyond price – from reconsidering attachment levels and programme structures to addressing risks that traditional programmes haven’t always covered efficiently.  

Look beyond price

Rate matters, but Sebastian sees value across the whole programme.

“Price is one component of value, and I think we spend more time exploring what value really means to our clients," said Sebastian. "Consistently, as we spend the time with them now in the build-up to the conference, every single one of them has to deliver an increase in value for their spend.”

What that means will differ by portfolio. For some buyers, the priority is reconsidering attachment levels to manage earnings volatility. For others, structural changes could generate more capital relief.

There is also growing appetite to address emerging risks, segments and perils that aren't always dealt with efficiently through the core reinsurance programme.

Rethink how risk is transferred

That question is particularly relevant for perils such as severe convective storms, hail and localised flooding in Europe.

The industry has become highly sophisticated at quantifying and transferring peak catastrophe risk. But recent loss experience has raised a different question: are programmes transferring enough of the risks that are driving earnings volatility?

“We've done a fantastic job at quantifying, protecting peak hazard, but in reality, if you look at the last 12 to 18 months and beyond, has there been enough effective risk transfer on perils like you mentioned? I think probably not," Sebastian said.

For Sebastian, that means reconsidering both the core programme and how individual perils are treated.

“We started this conversation last year with a lot of reinsurers on a more thoughtful approach per peril, as opposed to a default approach when it comes to attachments," Sebastian said.

That creates scope to look beyond a uniform approach to attachment points and consider more closely how individual risks behave within a portfolio.

Parametric is moving towards the mainstream

The core programme isn’t the only option.

Howden Re is investing in its parametric and structured capabilities as buyers explore additional ways to protect exposures that can be difficult to accommodate through traditional structures.

“What before felt exotic is now becoming a more mainstream product for our clients. So, certainly there's a role for those products to play," said Sebastian. "You're seeing reinsurers invest in it, you're seeing brokers invest in it, and it is certainly here to stay.”

The point isn't to replace the core programme. It's about giving buyers more ways to transfer risks that conventional structures may not address efficiently.