ACR’s Heerasing on margins, rebuilding and competition

November 6 2019 by Andrew Tjaardstra

InsuranceAsia News caught up with Bobby Heerasing, chief executive Asia Capital Re, at SIRC 2019 to discuss market trends and ACR’s priorities.

InsuranceAsia News: What have Asia Capital Re’s priorities been over the last two years?

Heerasing (pictured): 2018 was a year of rebuild from a people and infrastructure perspective. We have brought in expertise in several areas.

People such as Soeren Soltysiak, chief underwriting officer, treaty; Nicolas Winter, head of property and engineering facultative; Michael Resnikoff, head of casualty and financial lines and Ronnie Tong, chief underwriting officer, facultative and specialty.

2019 was a plan of execution. We have made huge strides in client and broker engagement this year.

We are also proud of our claims service and we are hands on when we need to be – depending on how much of a lead position we are in.

IAN: How have Asia’s 2019 nat cat events shown similarities to 2018? 

Heerasing: From a sector perspective, we aren’t operating in an easy environment. In 2017, the market was exposed to significant US losses; in 2018, we saw a number of large cat events with thin margins including [typhoons] Jebi, Trami and floods in India; 2019 was a slow start to the year but we now have [typhoons] Faxai and Hagibis.

This will be another year when our combined ratios are going to be stressed and our capital providers will be disappointed yet again – they need to make a return on capital deployed. As we walk into 2020 this is the narrative we are sharing with clients and these are some of the hard conversations we are having with clients.

Japan is less than 7% of our book and claims are within cat expectations and will have an impact on earnings but not capital. Hagibis has not put us off Japan but we need to address the rating fundamentals; we remain committed to the market.

IAN: How are rates keeping up with growth in the region ?

Heerasing: We are seeing underlying organic growth of around 5% (aggregates) year-on-year in Asia Pacific which is great for the region – especially compared with more stagnant Europe and North America markets; however, it does mean we have been taking on growth and exposures that have been coupled with rate reductions – the rate index has declined quite significantly over the last seven years which has contributed to combined rations being over 100%.

We have seen a number of frequency and severity events – so the rating environment needs to reflect these scenarios. We have been operating in a low interest rate environment since the financial crisis – we have seen reduced earnings to no earnings on the underwriting side of the business.

We want to work collaboratively with our partners and to reassure them we are trying to achieve similar goals.

IAN: Is there too much competition in the region and where can reinsurers improve?

Heerasing: It is not for me to say if there is too much or too little competition – Asian clients are well served and there isn’t a lack of choice. However, there is a reduction in options for clients post the merger of Guy Carpenter and JLT Re [as part of Marsh’s acquisition of JLT].

We believe the quality of modelling and data needs to be improved; also, the deployment of technology and the way we interact between client and reinsurance broker can be improved to help drive down distribution and frictional costs.