Qatar Re View Issue 7 2017

ISSUE 7 /2017

INSIDE THIS ISSUE VIEW FROM THE TOP Different is the new normal at Qatar Re EXPERTISE Strong capacity in times of drastic change THOUGHT LEADERSHIP Blurring the lines: actuaries as underwriters LATEST NEWS Recent appointments ONE TO ONE Senior risk management actuary

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Dear Readers

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As the Greek philosopher Heraclitus once remarked - change is the only constant in life. This maxim could also be applied to reinsurance. The old certainties are starting to appear vulnerable against the onslaught of creative destruction fuelled by some powerful drivers, for example shrinking margins from traditional business or the data capture/analytics revolution.

The impact of change in reinsurance is the leitmotif in this year’s last edition of ‘Qatar Re View’. Find out in ‘View from the Top’ how our CEO, Gunther Saacke, sees the operating environment for the industry and how Qatar Re is positioning itself to exploit the opportunities coming to the fore.

We also have a feature on the U.S. market as Luke Roden, Chief Underwriting Officer, elaborates on how the company is positioned to grow its North American business, backed by a solid capital base and enlarged presence in Bermuda.

In ‘Blurring the lines…actuaries as underwriters’ we drill down to the essentials of writing business, looking at how the evolution of these two traditional roles has brought them closer together and how the industry can benefit as a result.

Finally, a company needs the staff to enable it to keep pace with change. Find out about our latest recruits in ‘Recent Appointments’. We also include an interview with Aoife Burke, one of our young professionals based in Bermuda.

We hope you enjoy the latest edition of ‘Qatar Re View’ and look forward to receiving your comments and questions.

Your Qatar Re View editorial team

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VIEW FROM THE TOP

Different is the new normal at Qatar Re

Gunther Saacke, CEO, Qatar Re

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he global reinsurance market is operating increasingly close to its limit. Prioryear reserve releases and benign natural disaster losses barely mask the fact that the industry no longer earns its cost of capital, implying that it has stopped creating value for its capital providers.

Business as usual has become an unrewarding proposition for global reinsurers, in particular as there are structural, rather than cyclical headwinds.

Just think of the ever-growing efficiency and fungibility of capital or the erosion of tangible bricksand-mortar assets in today’s digital economies.

nature and continuous malaise of the reinsurance market, let alone the pace of unfolding technological and other macro developments. Starting up in what was and ever since continued to be a soft market meant nothing less than engaging in a bet against reality. Being radically different, while not sufficient, undoubtedly was the necessary starting assumption - whatever the strategy mix of the company was going to be composed of.

Good competition is what we all need. Good competition is the one thing that one rarely encounters in a market that lets itself down, continuously diluting its rigours and disciplines, while normalising past successes and achievements into the noisy boredom of under-performance.

From the outset, Qatar Re has steered clear of the It would be presumptuous to claim that the es- mainstream. Radically aiming at being more to our tablishment of today’s Qatar Re back in 2013 was clients than a provider of capacity we have focussed predicated on a clear anticipation of the protracted on situations that allowed us to offer more: Where 4

cedents have an edge, where they are out-performing or making all the efforts that eventually will create outperformance Qatar Re offers its full range of capabilities, products and services combined with our excellent security. - Looking to be everything to everyone is the complete absence of strategy and ultimately of identity.

Re team has managed to build value against the odds of an increasingly self-destructive market environment.

Going forward we remain convinced that the eroding return on reinsurers’ core activity – the assumption of volatility risk - will put a growing premium on Qatar Re’s strategy or more precisely on our way The strategic choices we made at the outset have of being different. become instrumental in building a company that Key elements of “being different” at Qatar Re profitably grew from just about USD 100 million in From the outset, even though the breadth and depth gross premiums written in 2012 to more than USD of our underwriting skills stand up to any peer com1.2 billion in 2016. parison, we refused to join the predominant game The current state of affairs in our operating envi- of simply tracking the market. Instead, we opted to ronment strengthens our commitment to engage support promising ventures in insurance entreprein and offer our clients outstanding, scientifically neurship where we see the potential for innovation informed analytics together with creative, some- in product design, risk management, distribution times innovative structuring of reinsurance pro- or financing. These carefully selected and vetted grams and solutions. Combined with the proximity ventures benefit from our private equity-style supand close understanding with our clients the Qatar port and our willingness and capacity to ‘follow 5

VIEW FROM THE TOP

their fortunes’. We enjoy joining forces with insurance entrepreneurs in complex and bespoke transactions, deploying our proven capabilities in the advanced capturing and integration of data as well as the development of knowledge intense products and services. Our clients, both risk carriers and originators, gain access to tailored solutions whereas Qatar Re achieves more predictable levels of profitability with lower capital intensity in such structured solvency relief and growth financing deals. The bottom-line in terms of differentiation in competition is that typically our clients mean more to us than they would to (market tracking) competitors as we take a a meaningful share in their fortunes.

Second, we believe that the empowered expertise of our underwriting and support staff sets us apart.

As many of them combine multiple skills in one person Qatar Re does not take decisions by committee.

Our organisation is “easy to read” for clients and we do not suffer from the paralysis typically associated with complex matrix structures. We spare our talent the frustrations and frictional cost of rigid matrixtype or committee-driven environments that management consultants so successfully established as an unquestionable norm for our industry.

And third, we have established a broad based global franchise serving and servicing our clients and brokers out of all major hubs around the globe within their office hours offering a full range of products and services supported by the long-standing personal relationships of our underwriters, actuaries, accountants and finance professionals.

What a modern reinsurer does Created on the back of these critically important differentiators, Qatar Re is a modern reinsurer: a resilient operation in the face of unrelenting margin erosion. In addition to resilience, the distinct features of Qatar Re’s strategic and operational setup provide a competitive edge that has allowed the company to thrive.

If there was any one “most relevant” element fuelling the extraordinary dynamic Qatar Re has shown to date it would be our consistent focusing on aligning ourselves with and supporting insurance entrepreneurs at a time when incumbent insurers face existential threats to their traditional business models from digitally and analytically enabled start-ups.

The accelerating dislocation that we are observing

The dawn of the digital economy offers massive opportunities to ‘nonreplicative’ entrepreneurs whose innovative approaches destroy the status quo in a creative way, nurturing new business rather than simply re-distributing existing revenue streams.

However, reinsurance continues to be a rather complex affair and it will only ever be a combination of many qualities and differentiators that make the success of an operation. With all of this said unquestionable financial security and substantial capital support will remain the bedrock for what we do. - Offering “A”-rated security Qatar Re is regulated by Bermuda Monetary Authority. The company’s surplus position reflects a solvency ratio in excess of 400%.

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most prominently across the established markets in the US, the United Kingdom as in some of the Asian Markets is accompanied by an erosion of barriers to market entry such as capital strength, economies of scale or a vast pool of historical underwriting data.

The dawn of the digital economy offers massive opportunities to ‘non-replicative’ entrepreneurs whose innovative approaches destroy the status quo in a creative way, nurturing new business rather than simply re-distributing existing revenue streams.

data with greater levels of precision and behavioural data create differentiating opportunities, for the “open minded” fraction of the incumbent market just as for innovative start-ups that are unencumbered by legacy issues.

Well positioned to deliver Qatar Re is well positioned to assist innovative insurance entrepreneurs in playing their increasingly important role. Clients can expect us to deploy the full scale of our capabilities, products and services ‘Incubating’ insurance entrepreneurs to support their insurance ventures. Our organFrom the very beginning Qatar Re was keenly seek- isational set-up and management culture give us ing opportunities for ‘incubating’ innovative ven- natural advantages in terms of agility, speed and tures (including MGAs) in insurance by providing accessibility. an efficient source of funding, volatility protection This clearly is a mutually beneficial proposition, and specific underwriting and operational services based on an efficient ‘division of labour’: It enables to complement the entrepreneur’s own capabilities. the insurance entrepreneur to focus on its ‘comparThese insurance entrepreneurs are greatly em- ative’ advantages, e.g. in product development and powered by digital technology and advances in distribution whereas Qatar Re ensures an adequate analytics, which they usually adopt much faster degree of capital efficiency, shields the insurer’s than incumbents across the insurance value chain. balance sheet from catastrophe risk and thereby Combining their in-depth insurance expertise with affords their founders a certain ‘peace of mind’. By talent from the tech spaceis expected to develop funding more attractive products and methods of into a very powerful business proposition, for distribution Qatar Re hopes to contribute to what example in risk selection and pricing where the the pundits expect to become a fundamentally difubiquity of real-time data starts to reshape the ferent future paradigm of insurance. status quo. New predictive models, location-based 7

EXPERTISE

Qatar Re to support its U.S. clients with strong capacity and proven expertise in times of drastic change

Luke Roden is Qatar Re’s Chief Underwriting Officer - Short Tail Classes and Head of Ceded Re. He is an industry veteran with a track record of developing and maintaining large, profitable reinsurance portfolios over the past 25 years. The Qatar Re team is looking forward to offering the company’s capacity to cedants seeking a reinsurance partner that has a risk appetite for both conventional risks and non-conventional, more demanding, risks.

By Luke Roden, Chief Underwriting Officer - Short Tail Classes and Head of Ceded Re

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t is still too early to predict the impact of this year’s hurricane season on the U.S. (re)insurance industry. It remains to be seen if Harvey, Irma and Maria will mark the turning point for the decline in (re)insurance rates. Opinions differ as to the response from alternative capital markets and the ultimate impact on today’s excess capacity.

U.S. non-life premiums are expected to grow on the back of higher GDP growth, which might translate into a top-line growth for U.S. non-life insurers.

Further rate increases by the Federal Reserve could increase future investment yields. However, claims in auto insurance have increased, as lower fuel prices led to an increase in driving and the cost for personal injury and car repairs soared at a double-digit rate. Before the impact from this year’s season, U.S. insurers had been spared from large hurricane losses for a few years. But, the frequency and cost of natural catastrophes continue to increase and exposure – earthquake and wind – has been increasing as well.

ance industry’s value chain. Insurtech, blockchain, big data, telematics and driverless cars, mobile and online distribution, may encourage the launch of new products, facilitate new distribution channels, improve risk management and increase overall efficiency. As a consequence, competition from both within and outside the industry may increasingly challenge the position of incumbents.

Future success in insurance will depend on the ability to use technology, data and advanced analytics.

It will also depend on insurers’ ability to anticipate and respond to the changing needs of a generation of tech savvy consumers.

Qatar Re is well equipped to support its U.S. cedants As a global reinsurer with a presence both in mature and emerging markets and a strong track record in

Current technological advances have the potential to affect, though not necessarily disrupt, the insur8

supporting innovative and often unique approaches to the market, Qatar Re is ideally suited to support U.S. cedants within this changing environment.

Headquartered and licensed in Bermuda, Qatar Re is well-experienced in the North American reinsurance market. Its team of dedicated underwriters, which has served the U.S. and Canada for the last four years, has steadily built a broad portfolio across all lines of business – targeting predominantly small- and medium-sized clients, who are keen to establish and maintain reliable long-term relationships with reinsurers who write risks across the board and are able to support them with meaningful capacity per line and risk.

from where it writes all of its global CAT as well as its North American business. Qatar Re has branch offices in Zurich, Singapore and Dubai, and is in the process of upgrading its presence in London to a branch office.

Over the course of the past four years Qatar Re has earned a reputation as a reinsurer with broad and deep underwriting skills. Building its global franchise in a declining marketplace, the firm had to carve out its own route to success. Instead of tracking the market, Qatar Re opted to focus on those insurance ventures where it could make a difference. In the current marketplace, the company deploys its capacity with partners that seek to bring innovation to the market by product design, risk management, distribution or financing.

In 2012, Qatar Re started off with a portfolio of just USD100 million in gross written premiums, which it grew profitably into a global book of business of more than USD1.2 billion by the end of 2016, making Qatar Re the 35th largest reinsurer worldwide (according to A.M. Best). Qatar Re, which has a capital base in excess of USD1.2 billion, recently moved into its new and enlarged headquarters in Bermuda,

Qatar Re is in the fortunate position of having capacity to grow its North American business. In terms of lines of business, Qatar Re in North America focuses on proportional and non-proportional treaties, property, natural catastrophe and casualty risks. Our full range of specialty lines also write global business 9

THOUGHT LEADERSHIP

actuaries as underwriters

By Mark Cockroft, Chief Actuary

What separates actuaries from underwriters? The obvious difference is qualifications: an actuary’s bacground is more likely to be mathematical.

However, if you start to look beyond the obvious, the common ground between the two roles overshadows the differences.

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he traditional view of actuaries as dreary masters of the spreadsheet and of underwriters as flamboyant rain-makers fails to describe the symbiosis of skills applied in today’s insurance world. Actuaries provide a fundamental grasp of data and modelling, while underwriters have a more complete commercial understanding: together they can, and do, combine efforts on a high proportion of insurance transactions. In fact, some people even combine the two roles, blurring the line between the two professions.

Although underwriters with actuarial training and qualifications have traditionally been few and far between, that is now starting to change. This development is not restricted to the longer-tailed classes either, in which loss projection is a significant sensitivity in pricing. Actuaries are increasingly moving into underwriting across the board.

At Qatar Re, the Head of Property Per Risk Treaty, Ivana Stark, is a qualified actuary. So are two of the company’s recent appointments. William Mulcahy has joined us as Company Actuary, working in the Underwriting department on strategic deals, having recently worked as Chief Actuary at ILS Capital Management Ltd., Securis and Ariel Re. Pantelis Koulovasilopoulos is our Deputy Chief Underwriting Officer on Long Tail and Specialty lines, and most recently was Chief Actuary at Chubb Tempest Re. More generally, there is a deep integration between actuaries and underwriters at Qatar Re that makes it difficult to establish where the boundary lies be10

tween purely actuarial and purely underwriting work.

Why has this change come about?

First, it is important to recognise that the nature of the insurance industry has altered. Higher levels of computing power and speed of electronic communication mean higher levels of data exchange, more detailed modelling and the ability to consider more complex products. Standards expected by clients, rating agencies, regulators and ultimately policyholders have risen. New forms of capital have joined the market that are more compatible with quantitative analysis. These are some examples of the changes that have pushed people who work with data and models to the front line with the underwriters. There are few classes of business that have not fallen into the embrace of modelling as an integral part of underwriting. Even if not used directly in pricing, data and models are still used for risk management, portfolio optimisation, management

Higher levels of computing power and speed of electronic communication mean higher levels of data exchange, more detailed modelling and the ability to consider more complex products.

information, and financial and regulatory reporting. To keep pace, underwriters have had to become more actuarial in their skills, or at least to work with actuaries more extensively.

The use of data and models must be counterbalanced by the need to interpret model results, to understand their assumptions and limitations, and to place the results in the context of the whole underwriting package including client management, portfolio management, wordings, market practices, competition and deal negotiation. Any actuary with those skills is well equipped to make the full transition into underwriting. By the same token, underwriters can become so familiar with the data and modelling skills that they almost morph into actuaries.

How can insurance companies exploit this convergence of roles?

Admittedly, there is cost-saving potential if one individual can replace two people. However, in this particular instance that benefit is less clear cut: companies typically have an underwriting policy that requires peer review of pricing and underwriting.

A single person represents key-man risk, the volume of business may still require several people to run the portfolio, and there may be a loss of creativity if someone is not deliberating deals with a colleague who can provide an alternative view.

For Qatar Re, the advantage lies in having underwriters with all the appropriate actuarial skills allied to a deep understanding of their markets. They have the ability and autonomy to develop profitable insurance solutions. Even if the underwriters don’t have formal actuarial qualifications, they are encouraged to acquire some actuarial skills. Similarly, actuaries are encouraged to acquire underwriting habits and experience.

Not all actuaries will want, or be able, to make the transition. Those that do, however, are sure to benefit as a result: greater involvement in all aspects of a transaction, a more interesting career offering new prospects, and greater ownership and accountability for results. And vice versa: underwriters with actuarial skills will better understand the numerical side of their job and become aware of new opportunities and solutions that might otherwise have remained hidden. What used to be the exception is becoming increasingly common: actuaries as underwriters.

The insurance industry is better off as a result.

From top to bottom: Ivana Stark, William Mulcahy, Pantelis Koulovasilopoulos

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LATEST NEWS

Recent Appointments At Qatar Re, we’re always on the lookout for professionals who share our business philosophy. Having the right staff in roles where they add maximum value is the key to strengthening our position as an incisive and forwardlooking reinsurer. Find out more below about some of our recent recruits.

Pantelis Koulovasilopoulos joined Qatar Re in May 2017 as Deputy Chief Underwriting Officer Long Tail & Specialty Classes and is to be based at the London office with responsibilities across the entire Qatar Re portfolio. Pantelis has over 27 years’ experience in insurance and reinsurance.

He is joining us from Chubb Tempest Re International, where he was the Chief Actuary. He was previously Group Chief Pricing Actuary for Aspen and before that Chief Pricing Actuary at Zurich Global Corporate UK. In addition, he has held senior roles at Canopius, Axa and Standard Life.

Pantelis has a BSc in Mathematics, a Postgraduate Degree in Actuarial Science, Statistics & Economics and is a fellow of the Faculty of Actuaries in Scotland, UK.

Ryan Gemmell joined Qatar Re in June 2017 as Group Reporting Manager and will be based in London.

Prior to joining Qatar Re, Ryan held the role of Manager - Technical Reporting at XL Catlin Group Ltd, where he was in charge of closing Syndicate 2003 and CUK as well asmanaging the strategic enhancement of the company’s GAAP close model. Ryan was also a key contributor in the Risks and Controls project and finance system integration post the XL takeover of Catlin.

Colin Philpott Dip CH joined Qatar Re as Facultative Claims Manager in September 2017 and is based in Dubai. Before coming to the Middle East in 2011, he worked as a commercial Loss Adjuster for 19 years in the UK & London markets.

In his previous role in Dubai, Colin was a Technical Director responsible for five offices in the region containing thirty field adjusters and risk surveyors plus administration staff.

Colin handled major losses including a number of high profile incidents in Ryan has a Graduate Diploma in Pro- the UAE and oversaw complex casufessional Accountancy from Massey alty claims.

University in New Zealand and start- Before becoming a Loss Adjuster, ed his career as a Business Service Colin had a spell with a Lloyds UnAccountant in Grant Thornton (NZL). derwriter & Composite Insurer and served in the Royal Air Force. Colin is married and a devoted father of two children, a teenage daughter and 19-month-old son. He is also an avid Tottenham Hotspur fan.

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Stefan Geisse joined Qatar Re in August 2017 as Practice Leader in Power Generation, Facultative Business Unit, and will be based in London.

Andy Fish joined Qatar Re in September 2017 as Senior Cat Pricing Analyst and is based in the Zurich office.

Stefan has worked in the power industry throughout his career. On graduating as a Mechanical Engineer (Energy and Power Plant) in Munich, Germany, he worked for TUV Energy Services as a performance engineer on a wide variety of power generation sites and technologies worldwide. Stefan then joined QinetiQ, a leading UK R&D company as part of an experienced power generation team to set up QinetiQ’s power generation business in 2002.

Prior to joining Qatar Re, Andy worked for Aon Benfield in London and Aon Securities. He also further complements the team with his experience in Specialty lines (Cargo, Specie, Power & Utilities, and upstream Energy).

Humzha Memon joined Qatar Re in August as Group Reporting Accountant in our Finance Team and will be based in London.

Umzha graduated from Kingston University in Accounting & Finance in 2012. He started his career at Munich Re, initially working in Credit Control before gaining a promotion to (Re)Insurance Accountant and then Financial Accountant in the Andy has four years’ experience in Taxation team.

Analytics, before which he worked as a research scientist in Meteorology.

He also has a Master’s Degree in Atmospheric Physics and Geophysics.

In 2010, Stefan set up STF ENERGY to provide technical and business consultancy to leading power generation businesses including RWE, ABB, MAN, Alstom, Eon and BEW for their conventional and nuclear power business together with a partner in Germany. Stefan then joined Sciemus Ltd as Director Power Generation, established a team of engineers and provided technical review and consultancy to Qatar Re’s Zurich and Dubai branches from March 2015.

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ONE TO ONE

From Dublin to Bermuda. What motivates a young professional with a penchant for teaching and love of the outdoors to pursue a career at Qatar Re? Ask Aoife Burke, Senior Risk Management Actuary.

Why did you choose to go into reinsurance?

I was interested in working in an industry, which provides the opportunity to solve real world problems, understand risk and gain exposure to customers. Reinsurance is particularly dynamic and innovative, as people continue to develop creative and efficient ways of managing capital and risk to meet customers’ evolving needs.

the development of high school students studying mathematics in Bermuda and to explore and enjoy all the beautiful beaches, cultural experiences and variety of sports and activities Bermuda has to offer.

Do you think the industry is attractive to young professionals?

I enjoy working with children and love music and maths, so I also considered becoming a music and maths teacher or a primary school teacher. I think I'd also really enjoy being an oenologist because I really love wine and visiting vineyards!

I think the industry is very attractive to young professionals. The industry requires individuals with a broad range of technical and interpersonal skills. The world is becoming more interconnected and complex, which leads to an increased demand for insurance and for innovation in insurance.

Do you think the reinsurance industry offers good opportunities and career development to young professionals?

The industry has many opportunities for career progression for young professionals. It is a global industry consisting of professionals from a wide variety of disciplines, presenting the opportunity to expand your knowledge and experience across many geographies.

What are your aspirations for the future?

Career wise, I would like to continue to broaden my experience and make key business decisions with a positive impact for stakeholders. Personally, I look forward to continuing to be involved with

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If you had chosen a different profession/career path, what would it have been?

CAREER TIMELINE

2017–present Senior Risk Management Actuary, Qatar Re, Hamilton, Bermuda.

2014–2017

Actuarial Manager, EY, Hamilton, Bermuda

2009–2014

Actuarial Reporting Actuary and Product Actuary, Irish Life, Dublin, Ireland

2008

Risk Management Intern.

Allied Irish Bank, New York City, USA

My experience at Qatar Re has been really interesting so far. It is great being so connected globally and working with such friendly and helpful people. I enjoy working at a company, which is open to new ideas and proactive about enhancing the risk management framework to support us in our decision making.

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Bermuda Qatar Reinsurance Company Limited 71 Pitts Bay Road Pembroke HM08 Bermuda Doha Qatar Reinsurance Services LLC 8th Floor, QIC Building Tamin Street West Bay Area P.O. Box 24938 Doha, Qatar Dubai Qatar Reinsurance Company Limited Dubai Branch Level 2, Offices 211-212, Gate Village 4 Dubai International Financial Centre P.O. Box 506752 Dubai, United Arab Emirates London Qatar Reinsurance Company Limited Representative Office 9th floor, 71 Fenchurch Street London EC3M 4BS United Kingdom Singapore Qatar Reinsurance Company Limited Singapore Branch 3 Church Street #12-02, Samsung Hub Singapore 049483 Zurich Qatar Reinsurance Company Limited, Pembroke (Bermuda), Zurich Branch Bleicherweg 72 8002 Zurich Switzerland

www.qatarreinsurance.com 16