As the only open market reinsurance company domiciled in the Cayman Islands, Greenlight Re’s view of the risk and rewards of the reinsurance industry is as unique as our headquarter’s location.
We are often asked, “Why is the company based in the Cayman Islands?” Cayman is home to many offshore captives, banks and hedge funds, and has a well-established infrastructure catering to the sophisticated financial services industry.
As a multiline property casualty reinsurer, we chose to domicile in the Cayman Islands in order to benefit from this infrastructure, and to define ourselves in an opportunistic environment. Today, we believe these qualities clearly differentiate us from other reinsurers.
These same fundamentals apply to how we view reinsurance risk: our risk focus is not on lines of business, but rather on the economics of the business. The current reinsurance industry is defined by a relatively small number of reinsurers with highly diversified portfolios that are virtually identical in that they share similar types of risk.
We prefer a more focused approach. While the spectrum of risk we support may be quite broad and includes multi-line property casualty, our risk appetite is for frequency oriented risks. In 2010 94 per cent of our premium was frequency business.
As a result we missed many of the major disasters such as the Christchurch New Zealand earthquakes (I & II), Chile earthquake and the Tohoku earthquake. In total for these events we lost $3.2 million. Frequency risks can be classified as having a large number of small losses as opposed to high severity business that has a low frequency of larger losses.
Today’s reinsurance marketplace is increasingly commoditised. Clients are predisposed to shop for price annually, and it is no longer good enough for a reinsurer to be a good risk taker. We view our underwriting operations as a way to engage with our clients, and in doing so, to build long-term partnerships in which Greenlight Re is truly a valued resource that helps them do their business better and succeed. In short, we are looking for customers that view us as true capital partners and work with us in the same way they do with their equity and debt partners.
We seek client partners that are experts in their fields. Being an expert means you know your market, you have distribution channels to source business and you have the discipline to write for profit, not market share. Our underwriters don’t pretend to know our client’s business better than they do.
What we can do is provide our reinsurance perspective on the insurance business and provide risk financing that makes that combination of reinsurance and specialty business expertise work better than the individual pieces. Once we select a partner, we don’t support direct competitors. Our model is to help our customers perform better in their business.
We achieve this by getting to know our partners’ business well and truly understand their business strategies. Our typical transaction will take months to come together and will usually involve multiple face-to-face meetings and extensive numerical analysis as well as a thorough understanding of a very important question – “Why does this company exist?”
We invest our time and effort to do this and value the face-to-face time spent between senior members of our respective teams. This fundamental understanding is particularly important to structuring a long-term reinsurance relationship.
We believe in win-win solutions and as such we align our interests with those of our partners in the reinsurance contract. This requires partners that understand and are willing to accept risk in managing their business, but it also means that we believe in sharing profits when the business is going well.
These types of partnerships take time to develop and can prove to be very important to both partners. If we are successful, our reinsurance solutions will help our clients seize opportunities in the market while also protecting their balance sheets.
This type of strategy has led us to a client-centric business model. We believe this makes us unique in the reinsurance space. We are constantly trying to identify ways to use our analytical skills and market intelligence to help our clients perform better.
We do simple things like share our actuarial analysis of our client’s data with our clients on a regular basis to help spot trends in the data and help them make adjustments to market conditions. We only support a small number of clients in any individual year which allows us to focus our attention on each one and to truly get to know their business.
Our underwriting team is fairly small and includes daily interaction with me, the CEO, which means that we can make quick decisions and give our clients certainty. Our clients are special and we really try to treat them that way.
When Greenlight Re entered the market in 2005 we wanted to combine the best-in-class underwriting with investment expertise. In six years we have expanded our client base despite very challenging economic conditions and a competitive reinsurance landscape. We are also branching out and taking our business model to Europe.
We opened a company in Dublin in 2010 – Greenlight Re Ireland, Ltd. We believe this company will find opportunities to develop long-term reinsurance relationships as a result of impending changes in regulatory requirements as a result of the implementation of Solvency II.
We have developed a way to be more than a counter-party to a reinsurance transaction, our model enables us to be a partner. Our client focused, partnership oriented approach to underwriting leads to long-term relationships with our clients. And that reward is one we value.