Guy Carpenter & Company, LLC, the leading global risk and reinsurance specialist, hosted its third annual press briefing on September 11 at the Reinsurance Rendez-vous 2010 in Monte Carlo. During the briefing Henry Keeling, President and CEO of Guy Carpenter’s International Operations, led a panel discussion on key industry issues, including determining the best use of excess capital in today’s marketplace.
Guy Carpenter’s Bill Kennedy, CEO of Analytics, Capital Markets, Specialty Practices and Advisory, Chris Klein, Global Head of Reinsurance Markets, Andrew Marcell, CEO of Global Practices and Head of Placement Strategy, and Nick Frankland, CEO of European Operations, joined Mr. Keeling on the panel.
In his opening remarks, Mr. Keeling said, “For many, excess capital is being returned to investors — taken off the table — in the form of dividends and buybacks. For some, this may be prudent, but we see this as giving up a potential competitive advantage.”
Mr. Klein followed with an overview of the state of the reinsurance market, observing that “it almost feels like 2007 all over again. Rates are falling, there’s plenty of capital in the industry, and reinsurers are trying to figure out what to do with it.”
He cautioned, “Returning capital provides some measure of relief relative to attaining return on equity targets, but it also comes at the expense of future growth. With the excess capital currently in the marketplace, carriers should be looking for value-accretive opportunities to deploy it, rather than send it back and sacrifice returns later.”
Mr. Kennedy discussed the macroeconomic factors framing the reinsurance rate environment, including the increasing volatility of economic growth and the likelihood of deflation. “Against this structural backdrop, global economic growth and reinsurance pricing may remain far weaker for far longer than normal,” he said.
Mr. Kennedy concluded, “With so much excess capital currently in the marketplace, carriers should be looking for value-accretive opportunities to deploy capital, rather than sending it back and sacrificing longer-term returns.”
Analyzing the impact of this market dichotomy is an important step in the development of solutions for optimizing capital and long term earnings power. Mr. Keeling said, “There are many ways insurers and reinsurers can deploy capital to grow their businesses — from new technology to emerging risks and markets. Returning capital doesn’t create profitable growth and increased market share. Innovation, on the other hand, does.”
Introduction by Henry Keeling, President and CEO, International Operations, Guy Carpenter
Chris Klein, Director of Reinsurance Market Management, Guy Carpenter
Bill Kennedy, Global CEO of Analytics, Capital Markets, Specialty Practices and Advisory, Guy Carpenter
Conclusion by Henry Keeling, President and CEO, International Operations, Guy Carpenter