Scor boss predicts years of growth and price rises
Scor chief executive Denis Kessler has claimed that the downturn is boosting demand for reinsurance as insurers increasingly seek alternative sources of capital to the financial markets, Dow Jones reports.
"We provide a substitute for other forms of financing. When financial markets are disrupted, insurers have difficulties tapping financial markets... Reinsurance provides last resort support to these companies," Kessler said.
"Unlike financial markets, which can be disrupted or can even close altogether, reinsurers are always open for business," he added.
Covering major risks such as natural catastrophes, is not linked to the economic cycle, Kessler said.
"That's why all in all demand for reinsurance tends to be strong" in the current context, he said.
Market has not expanded
Growing demand for reinsurance is fuelling a rise in prices, and unlike in previous crises the supply of reinsurance has shrunk, Kessler said.
“We see an uptick in prices during each renewal campaign. We have entered a phase during which prices as well as terms and conditions are becoming more favourable to reinsurers," he said, adding that he sees this phase lasting "several years."
"During previous cycles, when prices were going up like after the Katrina hurricane, new capital was entering the industry to take advantage of higher rates. But these days, hedge funds and even banks are reluctant to invest in reinsurance as they have other problems to deal with. Overall, supply tends to diminish," he said.
Kessler sees limited scope for consolidation, stressing that the number of players is already small. "In times of revenue growth companies tend to concentrate on organic growth," he said.
Scor on target
"Scor has exactly followed its road map," Kessler said, stressing the company had not engaged in any banking or off-balance sheet activity, and had heavily shifted its exposure to cash from the onset of the financial crisis.
He said Scor had enough capital to underwrite its current business.
"We are a capital-driven company. We are only taking on risks that are commensurate with the size of our capital."
