Reinsurance – spreading big risks

  • Premium volume of the global reinsurance market in 2013 in excess of USD 200 billion
  • Industry in flux due to new investors and excess capacity
  • Diversification and development of new markets offer opportunities for reinsurers
  • UNIQA Re exclusively assumes risks from the UNIQA Group

Around the world, natural disasters caused economic losses totalling around USD 130 billion in 2013. Of this figure, USD 44 billion was covered by insurance. To protect themselves against a long-term financial impact, primary insurers cede risk to reinsurers, who identify, assess and assume risks that are difficult or impossible to calculate. This allows primary insurers to concentrate on their core business. "Reinsurers reduce the technical risk and equity requirements of primary insurers and help to stabilise their business," explains Kurt Svoboda, Chief Risk Officer (CRO), UNIQA Insurance Group AG, describing the advantages of reinsurance.

The flooding in summer 2013 demonstrated all too clearly how beneficial it can be for primary insurers to insure themselves against natural disasters. Seven Central European nations were hit by floods. All in all, UNIQA customers suffered losses that were covered in the amount of around EUR 63 million. "Our reinsurance model for natural disasters takes effect once the insured losses exceed a level of EUR 30 million. Anything above this threshold is covered by reinsurers. In this case, the figure was around EUR 33 million," notes Hans Uwe Müller, Managing Director, UNIQA Re AG Zürich. The remaining EUR 30 million in compensation was paid out by UNIQA.

As well as reinsuring natural disasters, UNIQA Re fundamentally assumes risk from all other insurance sectors – from product liability, art insurance and the risk of terrorist attacks through to property insurance. As a reinsurer, UNIQA Re exclusively organises, coordinates and bundles the reinsurance policies for all of the UNIQA Group's operating insurance companies. "With a team of 17 employees, we offer our services to all 38 UNIQA subsidiaries across a total of 19 markets. We see ourselves as a service centre for the Group and seek out customised and optimised solutions within the Group and for the Group," Müller adds. 

An industry in flux
Last year, the global reinsurance market had a premium volume of more than USD 200 billion. Around one-third of the global market is attributable to the three major European reinsurers (Munich Re, Swiss Re, Hannover Re). Having previously been stable and unaffected by economic fluctuations, the market now finds itself in a state of flux. The global non-life reinsurance industry is seeing intense competition at present.
This is partially due to the strong capital resources enjoyed by primary insurers. Prices are coming under pressure due to the positive results of reinsurers as a result of the lack of major claims in regions with established high risk potential. Prices are also being impacted by the emergence of new providers: Investors, hedge funds and pension funds have started to take an interest in the non-cyclical business of natural disaster reinsurance in the USA. Risks are transferred to the capital markets via insurance-linked securities (ILS). "The available yields are more lucrative than for traditional bonds, which makes them extremely interesting for investors," comments Svoboda. "A growing number of providers are taking a slice of the reinsurance pie, meaning there is less left over for the major players," summarises Müller. Finally, the sustained low level of interest rates is also having an effect on pricing in the reinsurance industry.

Diversification as a solution
It is important for the industry to clearly outline its strengths and its expertise, because demand for high-quality reinsurance cover is set to rise. An extended product range and the assessment of new risk types – such as cyber-risk – are potential alternatives for generating further profitable growth. And, last but not least, the expansion of business into the emerging economies will open up additional opportunities for growth, as the need for reinsurance cover in these markets will increase in the medium to long term: According to experts, demand is set to double between 2012 and 2020.

About UNIQA Re 
UNIQA Re AG is a service company that provides reinsurance exclusively for subsidiaries of the UNIQA Group. The company is responsible for, coordinates and arranges internal and external reinsurance relationships and helps to optimise the Group's risk capital commitments.

Selected key performance indicators of UNIQA Re AG for 2013:
Premiums written: EUR 1,110.1 million (2012: EUR 778.0 million)
Retained insurance benefits: EUR 686.5 million (2012: EUR 461.5 million)
Operating expenses: EUR 328.5 million (2012: EUR 175.6 million)

The UNIQA Group is one of the leading insurance groups in its core markets of Austria and Central and Eastern Europe (CEE). 22,000 employees and exclusive sales partners serve more than 9.3 million customers in 19 countries. UNIQA is the second-largest insurance group in Austria with a market share of around 22 per cent. UNIQA operates in 15 markets in the CEE growth region: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Hungary, Kosovo, Macedonia, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, and Ukraine. The UNIQA Group also includes insurance companies in Italy, Switzerland and Liechtenstein.

Vienna, 2. October 2014

UNIQA Group Communication

Untere Donaustraße 21
A-1029 Vienna, Austria
Phone: (+43 1) 211 75-3414
Fax: (+43 1) 211 75-3619