The measure of whether Gen Re’s underwriting partnership with TransRe is a success will be whether the arrangement lasts longer than the initial five-year agreement, the latter’s president and chief executive believes.
News of the deal, under which TransRe will be the exclusive underwriting manager for Gen Re’s US and Canadian property and casualty treaty reinsurance business, first came to light in July.
“We are combining the strengths, capacity, and reputations of two outstanding organisations to enable improved panel diversification and creditworthiness with one-stop seamless service,” Sapnar said at the time of the launch.
The arrangement provides brokers and intermediaries access to Gen Re's traditionally direct-only capacity through a new underwriting platform that will be fully managed by TransRe, with the deal initially lasting for five years.
By using TransRe's underwriting, claims and broking abilities across the two companies, the new platform is intended to bring enhanced solutions to the reinsurance market including broader capacity and line size.
“Our judgement of success will be whether we’re still trading in more than five years,” Mike Sapnar, TransRe’s president and CEO, told Reactions.
Sapnar explained that the platform came about after discussions with GenRe about accessing the broker market. Berkshire Hathaway subsidiary Gen Re has, in the past, only accessed business directly.
“As much as 85% of US reinsurance business is placed through brokers, and while GenRe has typically stayed true to its direct distribution, we worked out how they could access the broker market in a cost efficient way and create a portfolio that was attractive to them,” said Sapnar.
“This arrangement doesn’t require them to buy a broker market reinsurer, it doesn’t require them to change their culture from their direct underwriters and it doesn’t require them to hire people, so it’s a very low cost investment for them, and so it made a lot of sense.”
As Kenneth Brandt, president for North America at TransRe, explained, the Gen Re partnership “doesn’t require us to do anything”, and as such, the opportunity to significantly increase his firm’s capacity with minimal fuss was an attractive offer, especially as the company’s culture or risk appetite remains the same as before.
“Whatever our underwriting and risk philosophies were before the deal, they carry on after - none of that changes,” Brandt said.
“We compete with European reinsurers that are a lot larger than us, and while we weren’t concerned about our scale, the ability to effectively grow our capacity without having to worry about integration risk or anything like that was very attractive,” Sapnar added.