US reinsurers are in peril of repeating the mistakes of the past by sacrificing profitability, said a panel of industry leaders and ratings analysts at Standard & Poor's (S&P).
The panel warned that reinsurers must resist the temptation to pursue market share in at the expense of bottom line results as the market softens.
“This is the opportunity to put into practice what we should have learned from the past,” commented Al J. Beer, executive vice president of American Re. “We have to get ourselves out of our cyclical behaviour.”
The US reinsurance industry has a long way to go to convince itself and its employees that it can be profitable,” added Beer. His remarks came at S&P's Annual Insurance Conference in New York City.
S&P said the panel was in agreement that the industry was at a crossroads.
But it said reinsurers had to maintain discipline and walk away from unprofitable business. S&P urged reinsurers to concentrate on the bottom line rather than the top line.
Everest Re chief executive Joseph Taranto said: “When your volumes are dropping, it's very hard to tell your shareholders that's a good thing, that they should be excited you're doing less business.
“Having said that, it beats the alternative of writing more business and later having to pay for it.”
Reinsurers will also have to give up entrenched behaviour patterns, warned the panel.
“A lot of money has been made recently,” said Britt Newhouse, Guy Carpenter - North America president. “The problem is that the people who made it don't stop writing the business when they should.”
