INTERVIEW: TOBIAS SONNDORFER, VIG RE
An alignment of interest is key for success
An alignment of interest between insurers and reinsurers must be reinforced, to have a balanced distribution of losses.
Reinsurer should seek alignment of interest in reinsurance structures, according to Tobias Sonndorfer, member of the board of directors of VIG Re.
“Our goal is to work with our clients on a long-term basis. It’s not sustainable if losses are unevenly distributed, ie, if losses are happening, reinsurers take on the lion share, while insurers have only limited impact into their profit and loss statement. This alignment of interest needs to be reached,” he says.
“The renewal discussions should find a balance between a reasonable retention compared to the limit of a placement. Balance for me means that reinsurer cover severe loss situations while insurers cover the frequency losses in their portfolios and price for it accordingly.”
Levers for success
Aside from aligning interest, Sonndorfer states there are two levers that are crucial for success for the upcoming 1/1 renewals. Communication will be, and always is, a key factor, according to the manager.
“After the last renewal, it is important to match risk appetites of reinsurer with cedants’ requirements. Brokers play an important role here in translating the risk appetite between cedant and reinsurer,” he says. VIG Re wants to keep the connection with its clients during the renewal period, rather than sending a quote and waiting to get a share.
“The reinsurance market needs to continue to earn the trust of investors.”
Tobias Sonndorfer, VIG Re
Disciplined underwriting will again be a key success factor. Sonndorfer says underwriting discipline must continue, to reach sustainable pricing levels in nat cat but also in other lines of business. “Nat cat placements had significant pricing adjustments in the last renewal and other lines of business need to follow,” he adds.
On the timing of renewals, stakeholders must bear in mind that everyone works towards a different timetable, he explains. In the DACH region (Germany, Austria, and Switzerland), for example, the renewal discussions have already kicked off, he says, while other markets haven’t even provided submission data. “The renewal period ends on December 31 also this year,” he adds.
Cedants who are prepared for renewals will have an easier time at Baden-Baden, Sonndorfer adds.
“The ones who provide insightful portfolio data, did analysis on programmes and make proactive proposals on changes to their programmes will have much easier discussions in Baden-Baden and this renewal than those who didn’t,” he explains.
“Many of the discussions with our clients started in the first half of the year. We conveyed our messages in terms of alignment of interest, potential structural adjustments, and price expectations for specific treaties,” he says.
“We are confident because we feel continued tailwinds on reinsurance pricing.”
Wider discussions
On a broader perspective he believes that reinsurers must grapple with investor trust and the wider macroeconomic conditions.
“The reinsurance market needs to continue to earn the trust of investors until they come back. One good renewal isn’t good enough. In the forthcoming renewal, reinsurers need to demonstrate that they continue with pricing adjustments where they are required,” says Sonndorfer.
“The difference reinsurers should apply is to implement those corrections or changes with, and not against, the client. That is the twist that needs to happen,” he says.
He adds that the macroeconomic fundamentals are very much the same as a year ago. Inflation is still beyond the central bank’s target rates and consequently interest rates are still increasing. This raises the cost of capital for the reinsurance industry and creates attractive investment opportunities for investors.
More generally, at Baden-Baden Sonndorfer hopes for discussions that are broader than those in Monte Carlo. He believes there will be discussion in lines other than natural catastrophe, including motor and liability lines.
Sonndorfer concludes: “We are confident because we feel continued tailwinds on reinsurance pricing. We plan to support our clients going forward more broadly than we did in the past. We have capacity, and we want this capacity to be deployed with the right terms and conditions.”
Tobias Sonndorfer is a member of the board of directors of VIG Re. He can be contacted at: info@vig-re.com
Main image: Shutterstock / Danielle Balderas
