David Flandro, Managing Director, Head of Industry Analysis and Strategic Consulting at Howden Re, said in a recent video interview with Reinsurance News that in a competitive and capacity-rich cycle, reinsurance brokers need to take a “multifaceted” approach to meet the needs of modern global buyers.
“I think as an industry we have to be more diversified,” Flandro said. “Yes, of course, treaty arrangements and working with the market, investors and buyers to find the best solution as the market pricing environment changes, that’s obviously critical in the treaty. And then leveraging interim reinsurance in the right way at the right time, including D&F, including retro, all of that is absolutely critical.”
A key driver of this shift is how buyers now view their risk transfer. Flandro noted that reinsurance is increasingly viewed not just as an expense but as a strategic financial instrument, such as equity or debt.
“But brokers also need to provide strategic advice, whether it’s advice on rating caps, regulatory caps, valuations, ALMs, ERMs, captives. All these discussions that brokers need to have on a daily basis, we have to be well versed in, and there has to be a bridge to the capital markets. Because reinsurance is a form of contingent capital, just like equity and debt, any sensible large-scale buyer would consider reinsurance in this context,” Flandro explained.
In addition, managing general agents (MGAs) and specialist facilities are becoming increasingly important and indispensable to clients, especially as the market pricing environment remains unstable.
“It’s treaty, FAC, strategic advisory, capital markets and finally MGA. MGA and facilities are an increasingly important part of the market for our clients, especially as the market pricing environment changes. So brokers have to at least have all five of those things on the table in addition to all the other advisory services we undertake. But it’s an important part of the story, certainly more important than it was 10 years ago,” the executive concluded.
Watch the full video interview to hear Flandro discuss brokers and other trends changing the re/insurance market.
