Enabling The Reinsurance Buyer To Buy
Entering a transformative phase in the reinsurance business poses the question, "what is the point of the reinsurance intermediary today and how do they remain relevant?"
Power is with the reinsurance buyer, not the seller today because information is readily available. In much the same way power lies with the insured, not the insurance carrier in most instances. The buyer can check anything from brokerage fees to available coverage limits to where reinsurance is being bought and sold to the choice of carriers or capital market providers, in any market around the world. They can investigate, compare and choose lead property catastrophe reinsurers' terms in hours, they can do the same with a D&O casualty reinsurance program in a few days, and a collateralised reinsurance or cat bond program in a rapidly decreasing time period, irrespective of geography. It no longer makes sense for reinsurance intermediaries to keep espousing that their people build sales skills. It is time they focused on enabling the reinsurance buyer to buy. That is where the power is.
When I entered the profession in 1990 the mantra was that reinsurance needed to be sold. After all without reinsurance sales people, how would the industry function? We trudged out with our slipcases and glossy reinsurance "books" and in the latter half of the '90s with our in-house actuaries and risk models in hand, to take our cherished position alongside investment bankers, brain surgeons, and bomb disposal experts in our noble profession.
Time for Perspective
As Smokey Robinson muses in "Tears of a Clown", "Now if there's a smile on my face, It's only they're trying to fool the public". I watch reinsurance intermediaries today selling all kinds of products and services. There are excellent salespeople and horrible ones, and that diversity applies to brain surgeons, investment bankers and bomb disposal experts (though the latter have a natural self-selection).
The job of a reinsurance intermediary is to enable the reinsurance buyer to buy. Cedants have certain "wants" which they put on the table in exploratory meetings but they also have hidden and underappreciated "needs", which we should help identify. (The difference between what the Cedant wants, e.g. a new top layer and what they need e.g. a more capital efficient and effective means to transfer risk, is what I call your "value multiplier.") Too many reinsurance professionals walk into a buyer's presence with the belief that "they need to grab something from the buyer." They seem to feel that they have to justify themselves and validate their work so that they can ethically "take" the buyer's money.
Value is king, Not your cash on the table or size
My belief is that we work with reinsurance buyers to produce, deliver, convey and transfer: value. We are not taking, we are giving. Our honest-to-god belief must be that we are dramatically improving the buyer's profitable growth through the provision of our industry knowledge, our expertise, our track record of success, our behavioural and special skills and our contacts -in aggregate, our value.
Hence, why wouldn't we aggressively pursue this wonderful and outstanding opportunity? Not every buyer realises how much they can profit from our value. We need to raise their awareness, thus enabling them to buy. (If that means locking the meeting room and not leaving until they repeat word for word your renewal strategy, so be it.)
"Hawking" products and services, explicitly leveraging primary business and sneaking through opaque service charges (Don't you love all those client service agreements, which provide a higher profit margin than the actual re(insurance) transaction?) is not noble work, nor is accepting bribes (accepting contingent commissions), nor being supercilious (you are not providing "client leadership", you are enhancing your competitive power, your ability to sell more services and increase your top line).
Providing the unique value that you alone can articulate in order to improve a client's condition IS virtuous work. So is linking your fair and equitable remuneration exclusively to meeting and exceeding your clients' objectives and the dramatic return that ensues. You might as well excel at doing both.
What does the future look like
Faced with a multiplicity of choices, reinsurance buyers and CFOs will often fall back on the tried and trusted. Doing business with only six reinsurers and capital markets although reinsurance intermediaries provide "access" to 80, seeking advice only from reinsurance professionals irrespective of the firm's size who they implicitly trust, using two cat risk models although the industry provides 25 alternatives, keeping money in low risk investment products even though there are equally safe but more rewarding investment alternatives.
Outstanding reinsurance sales professionals help the client and buyer through the complexity of alternatives in order to truly meet their personal and professional objectives. Fortunately, those skills are needed more frequently and more continually than those of any heart surgeon.
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