Greater cedant differentiation expected at 1.1 but disruptive new capital unlikely: Miller

Miller’s global head of fac Pierre Guntzberger has warned against jumping to any “quick conclusions” ahead of 1.1, outlining expectations for a nuanced renewal with different outcomes across territories and product lines.

Speaking to The Insurer on the sidelines of the industry’s annual Rendez-Vous in Monte Carlo, Guntzberger said further market hardening was unlikely in the absence of significant hurricane losses.

“Now, which direction exactly it’s going to go, whether it’s going to be flat or really softening, I think it totally depends on territories and on products. We’re not in the same environment as the last three years, that’s for sure,” he said.

He added that Miller is currently adopting a watching brief in the absence of a firm market direction.

“We’re a specialty broker, so we make sure that we don’t make any quick conclusions. There’s no real trend at this stage – we’re agile, and we’re just listening very carefully to what's going on.”

Shaun Sinniah, head of reinsurance and capital at Miller, noted that current uncertainty provides an opportunity for brokers to step up and play a prominent role in securing tailored solutions.

“Losses have fallen asymmetrically over the last 12 months, whether they’re known or ‘known unknown’ losses,” he said. “What’s clear is there is no one-size-fits-all solution across a client base, a territory or a country. That level of service is what is required from the broker fraternity.”

Sinniah continued that this will drive greater differentiation between cedants, particularly on terms and conditions.

“I do think pricing will come under pressure this year, because reinsurers have had a couple of good renewal cycles. On the other hand, you could argue that six quarters of profitability may not be enough to make up for the preceding decade,” said Sinniah.

“One of the fantastic things about our market is that it goes against nature. By that, I mean that nature tends to chaos, but our market actually wants to find a solution that works and create that homeostasis. So I think there will be a lot more client and cedant differentiation this renewal period.”

The dynamic nature of the reinsurance industry also means that greater capital will be required to help sustain growth and drive change.

“Ultimately, new capital coming into the market helps with the evolution or revolution within the market space. We’ve had a lot of talk about M&A activity picking up within the carrier space, so perhaps new reinsurers coming in will help to fill the void with respect to proposition, which may take other reinsurers out of the game,” said Sinniah.

“I would say that it is difficult to see a reinsurer coming in with exactly the same proposition and relying on just personal brand or personal connections to create long-term sustainable returns for their investors. For differentiation, a focus within a line of business, a client segment or a region is required.”

Miller eyes further European growth

For Miller, differentiation is in the form of developing offerings that straddle the increasingly blurred lines between capital deployment within the insurance industry and the reinsurance market.

“One of the interesting things for us in specialty business is that we are not static,” said Sinniah. “We want to take the specialty lines products in London, that are incredibly successful but perhaps don’t exist in other regions of the world, find complementary capital to back them, and reverse flow them out there.”

He added that Miller is currently focused on building out across continental Europe, the Middle East and Asia Pacific, with Latin America and Africa retained for phase two of its international expansion. The US is currently “a bit of a red line”.

“Given our growth strategy, if the right opportunity came our way, we would absolutely look at it. Having experience in M&A before, our vetting process is a little bit more rigorous, and we’d probably say no to a lot more opportunities before we even get to vetting,” Sinniah concluded.

“We look at a cultural fit and the business fit, the strategic direction of the country, the territories, and the potential acquisition. We’ll never say no to looking at other regions and other countries, but I think we’re very specific in that we know what we like and we know what we don’t like.”