10 Years On: RGA and the Nordics
Mischa Wessel - BakkerPricing Actuary Netherlands and Nordic Regions
RGA International Reinsurance Company dac
This year RGA’s Netherlands and Nordics office celebrated its 10th anniversary. The office has direct access to the Netherlands market, as the office is located in Amsterdam. This home base by no means diminishes the business in the Nordics (Sweden, Norway, Finland and Denmark), as Mischa Wessel-Bakker, Pricing Actuary and guide to the region, explains.
1. What was the Nordic life market like when RGA first came into it?
RGA was present in the Nordic region prior to 2009, which was when the Amsterdam representative office was launched, and a year before the office became an official branch. At the time, we had several ongoing catastrophe treaties, inherited from an earlier acquisition of a European reinsurer.
2. What role did RGA expect to play in this market?
We believed the region had strong potential for RGA in mortality and morbidity, given the business and cultural similarities between the Nordic and Netherlands markets, especially in terms of group coverage needs. However, we also knew that getting a good foothold would take some work. Many life insurers in the region had never heard of RGA, so we knew we would have to put real effort into learning the markets and people. Also, as most life reinsurance in these countries is done through brokers, we would have to become known to them as well. Fortunately, regular visits led to common interests with our brokers and clients, where sharing of each other’s knowledge created partnerships.
3. What were there challenges along the way?
In 2012 and 2013, risks for Nordic life insurance companies were rising due to the increasingly difficult economic climate, stemming from the financial crisis that began a few years earlier. Both high guaranteed interest rates for in group life, disability, and pension blocks, strong price competition, and the increasing responsibilities of insurance companies within the social systems of these countries came together. Insurance companies responded by focusing more on policy conditions, underwriting and claims management, and became more willing to explore innovative reinsurance-based solutions to stem these losses.
4. How would you describe the region’s market today?
RGA has become well-known in the region, especially for innovative value-added and capital-motivated solutions. Our business is primarily in four lines: catastrophe, non-proportional group mortality and disability, individual disability, and capital motivated reinsurance. Disability lines are especially important, as employers are increasingly responsible for covering these risks in order to compensate for the gap between available social benefits and actual salaries in the high-net-worth market sector. This need is even stronger for the self-employed. Our quota-share and financial solutions (mass lapse) business lines have also been growing in the region in recent years.
5. What is the outlook for the region’s life insurance markets over in the next few years?
The biggest trend nowadays in the insurance markets in Nordic countries is the consolidation wave, putting a “eat or be eaten” pressure on the companies. From 2011 to 2017, Sweden and Denmark have each seen a nearly 30% drop in the number of companies working in their markets). This trend is likely to continue.
A second challenge has been the continued low interest rate environment which, along with high interest rate guarantees as well as Solvency II, have been driving increased interest in reinsurance-based financial solutions strategies.
Consolidation could benefit insurers by increasing their financial strength, but fewer and financially stronger companies could also lead to less need for reinsurance. That being said, our outlook continues to be positive. The diverse mix of growing needs is generating new trends and disruptive ideas, which will continue to fuel demand for strategic life reinsurance solutions.