SIRC: ‘There are more purchases towards the capital piece than the earnings piece’ — Gallagher Re’s Mark Morley

November 1 2023 by

In the build-up to the latest edition of the Singapore International Reinsurance Conference (SIRC), Mark Morley, managing director and head of Asia Pacific at Gallagher Re, told InsuranceAsia News (IAN): “Discussions around 1.1 renewals for 2024 are underway but at this stage it’s less around pricing and more around structural approach. At Monte Carlo there was a lot of talk about an ‘orderly’ renewal, but I prefer the term ‘predictable’ – so we can explain to our clients what they can expect in terms of reinsurer reaction. I have greater confidence this year than last year we will see that.”

Singapore-based Morley added: “Carriers understand the economic environment they are operating in. 1.1 is dominated by the emerging markets and our sense is that there is more than adequate capacity to deal with the demand. In the absence of any significant change in the demand / supply relationship, we don’t see a significant drive beyond a risk-adjusted approach. Where there have been losses, such as in Hong Kong and China, you can assume the market will readjust.”

“For emerging Asia, we’re focusing on some of the lessons learned from [the] January renewals, which picked up pace in 1.4 and 1.7, specifically around risk sharing between reinsurers and insurers and the lifting of attachment points. In EMEA and the US that’s around the volatility piece, but in parts of APAC, particularly emerging APAC, lifting attachment points could be an existential issue,” he continued. “So, while we can understand reinsurers rebalancing the risk with carriers, we are looking for a more nuanced approach. There are more purchases moving towards the capital piece rather than the earnings piece.”

Explaining the broker’s approach to the region, Morley said: “Gallagher Re is a bit different. We don’t tend to think around a product line or geography. Our ethos is around understanding thematic motivations or challenges for clients and their portfolios. Relative scarcity of capital would be one. Retrospective solutions, for example, can help solve that particular challenge, while also benefiting regulatory capital positions and enabling growth – we have seen more demand for these.”

“We have also done well in parametric, especially in the quasi-governmental space, for example in the Philippines. Private firms are still getting their heads around index basis risk. They want to match it to traditional and it’s harder to get through their procurement process.”

He continued: “Gallagher Re is the largest broker in the region when it comes to structured solutions. There are more insurers looking for creative and innovative solutions. Sometimes propositions of reinsurers are less clear, but our clients are looking at a pretty granular level at the value that markets bring to them. Beyond capacity and price, what do you as a reinsurer bring to the table? When you talk partnership, what do you mean by that? And different reinsurers are on different journeys.”

On reinsurers’ demands, he commented: “Reinsurers are still looking for clarity of intent and strategic aims underpinned by robust analytics. That won’t change because they are becoming more segmented about the way they approach their clients. But analytics’ investment has to be huge to provide coherence and competence to reinsurers and it can’t be delivered by everyone. There is a wider moat than others may see – especially for new brokers to navigate.”

There has been an increase in interest in reinsurance from insurers in the likes of the Philippines and Indonesia who Morley describes as “incredibly savvy buyers and inquisitive of information.”

He said: “If you have a limited capital base, as a carrier you will naturally be thoughtful. We have never had more talks with CFOs and CEOs and buying in emerging markets is now at least as sophisticated as in the more traditional markets. It has changed in the last five years, and this has been partly driven by regulation and partly by a desire for capital efficiency.”

“The majority of global growth in (re)insurance is being driven by Asia Pacific – there is an organic growth opportunity which is irresistible.”

Mark Morley, Gallagher Re

Gallagher Re in APAC
In APAC, Gallagher Re, which was greatly boosted in the region through the acquisition of Willis Re — a deal completed in December 2021, has around 280 people across 17 offices in 11 countries. The broker placed over US$2.5 billion of premium into the market from the region, with strong growth in the last 12 to 18 months and ambitious plans over the next five years.

Morley said: “The majority of global growth in (re)insurance is being driven by Asia Pacific – there is an organic growth opportunity which is irresistible. Our Singapore, Korean and Taiwan teams are all building out. In India we have hired Vinod Krishnan and increased our investment, and you will see that increase over the next 18 months.”

He added: “We have a license in Hong Kong and a joint venture in China and our aim very clearly is to have our own license in mainland China. That is our platform priority for the next 12 months.”

Commenting on changes in its Australia team, Morley said: “We had two areas [in Australia] of turnover in Australia: first through the collapsed Willis Re deal with Aon and then the transition into Gallagher. The team has been entirely rebuilt with more appointments to come. We will be fully present in the coming cycles.”

There are currently no plans to open in New Zealand as it covers country from Australia. However, it will be driven by client demand. He said: “What our clients expect is access to our knowledge and capabilities across the global organisation. As long as we deliver that, they are neutral to our geographic location.”

Morley also explained the increased use of analytics by brokers in the region.

He said: “Analytics underpins everything we do. Where we see gaps, we will look to build proprietary solutions. For example, we built the Malaysian flood models out the back of that complementary cat model approach. Over 25% of our resources are now analytically orientated, which is a real step change. And that’s not sitting in silos but fully embedded.”

For more IAN coverage from SIRC click here

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