Simon Wigzell, UnipolRe
Empowering reinsurance buyers
on capital optimisation
As capital optimisation becomes ever more important to insurers, reinsurers can
benefit from a new platform being developed by UnipolRe designed to empower
reinsurance buyers, Simon Wigzell, the firm’s underwriting manager, explains to
A new platform being developed
by UnipolRe, the Ireland-based reinsurer
owned by Unipol Group in Italy, will allow
reinsurance buyers to gain a better handle on
what effect adjustments they make to their
buying strategies will have on the capital and
overall risk profile of their companies.
Simon Wigzell, underwriting manager
of UnipolRe, explains that the solution,
available in the first quarter of 2018, is being
developed by the reinsurer because it recognises
the growing importance of capital optimisation
within companies, especially since Solvency II
came into force.
“UnipolRe wants to create and share value
with its partners by focusing on their specific
and emerging needs, and this is an example of
our service-driven approach,” Wigzell says.
The tool is completely secure—the
application will be installed in-house and
UnipolRe will give onsite support—and allows
a buyer to look into its own data and explore the
effect of different buying strategies and the levels
of capital relief achieved, and the effect these
have on the capital efficiency of the company.
“It will allow reinsurance departments
to interface with internal risk management
better and play around with different risk
management structures,” Wigzell says.
“It will help them determine what types of
reinsurance structures are the best fit for the
company. At the moment the dynamic is often the
reverse, with group risk management formulating
the capital efficiency of the reinsurance. We hope
to reverse this dynamic and allow the reinsurance
department to analyse the effect on the result
and the effect on the capital and help them to
contribute towards the risk management.”
Wigzell says that Unipol group has
developed great expertise in this area by
developing its own partial internal model and,
in particular, how to manage reinsurance in
the internal model and in the standard model
under specific parameters.
“Efficient capital solutions are
now a key part of the overall
strategy of insurers.”
UnipolRe can also support companies using
it by providing other forms of advice on how to
manage their capital better and deal with the
regulators in relation to Solvency II. For instance,
he says, it can advise on how much and what
type of information to supply to a regulator.
“Too little can cause problems, but so can
too much,” he says.
He adds that developing an internal model
is not always the best option for smaller
insurers. Again, UnipolRe can help. “A partial
internal model creates efficiency but can
be very expensive in terms of investment but
the efficiency can also be achieved with the
Solvency II standard formula,” he says.
This tool also has the potential to change
the dynamic with insurers between the risk
management department, the chief financial
officer and the reinsurance buyers.
“We are empowering them to be able to
make better decisions and better interact with
those other departments,” Wigzell says.
He stresses that more than ever, capital
optimisation essential to insurers. Too much
can mean that the company is not efficient in
the way it’s being managed, diluting the returns
for the stakeholders; too little is risky and
overexposes stakeholders and policyholders to
UnipolRe believes that reinsurance is a valid
tool to achieve the targets of the commercial,
reinsurance and risk management departments,
and its solution will support communication
and comprehension from all points of view.
Solvency II has been a major stimulus for
companies to look at the way they manage
their capital, but many smaller insurers are
struggling to get to grips with its requirements
and need help from their reinsurance partners.
“We speak with companies that need to
raise capital or are struggling to find enough;
we also see companies with too much capital—
some mutuals for instance,” Wigzell says. “That
can be equally inefficient.”
He adds that bigger companies with more
complex portfolios can often benefit from
developing an internal model, as can some
insurers in very niche or specialist lines. “In
those cases they might benefit, but it is not the
case for all,” he says.
Wigzell stresses that with low interest rates
and low inflation it becomes crucial, especially
for stakeholders, to focus attention on capital
management. Efficient capital solutions are now
a key part of the overall strategy of insurers.
Capital optimisation is a major driver of the
overall business model and all business units and
executive teams must ensure that it is embedded
within the strategic focus of the company.
Such solutions represent a unique
opportunity to structure reinsurance using a
more measurable approach, he concludes. n
Simon Wigzell is the underwriting manager of UnipolRe.
He can be contacted at: firstname.lastname@example.org
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