Dear Friend,

In darker moments, part of me wonders if our industry is collectively insane.

Look at the evidence:

Our customers get bigger, more sophisticated and more demanding by the day.

We face bigger problems than ever before — be it greater accumulations, higher catastrophic loss frequency or spiralling compensation culture, just where is the good news?

We are realising that we need a lot more capital just to keep our heads above water, yet we don’t seem to be able to offer potential investors any cast-iron assurance on the returns that they can expect.

The public doesn’t know we exist and probably wouldn’t value us even if it did.

The long-term trend of our financial strength ratings has been heading south for a decade or more.

We are facing heavy competition from other risk transfer mechanisms such as Cat bonds

But the lurking optimist in me makes me realise that the reinsurance market always finds a way. This is what the plucky little fella says:

“Of course our customers are getting bigger — the world economy is getting bigger too. And insurance is a boom business — and reinsurance too. Financial services have been growing faster than GDP for as long as anyone can remember — and wait until China, India Brazil and Russia really start developing — you ain’t seen nothing yet!”

“Bigger problems just mean more demand — and in the long term that just means more opportunities and better prices. Provided you sell something everyone wants, you’ll eventually be allowed to charge the right price for it”.

“More accumulations mean more capital and that extra capital needs somewhere to go — enough will always find its way to the right place eventually. If compensation culture gets so bad that a few high-profile players are blown up by it, even the lamest of lame duck politicians will have to do something about it — their public will demand it, especially of their pensions are at risk. And anyway, for the guys left standing, it’s going to be an absolute bonanza!”

“Don’t worry the public with what we do — better they don’t know too much. If they really understood the sort of risks we take on board, they’d never sleep at night.”

“If everyone falls off the ‘A-’ precipice, prices are going to go through the roof! Those left standing will make so much cash, they’ll be triple-A within six months.”

“Cat bonds — easy come, easy go — wait till they have to pay a proper claim — then watch them run away like naughty schoolboys.”

So there you have it — and remember — no-one likes a pessimist!