Most of the “Big Cats”–the eight property-catastrophe companies formed
in Bermuda during a 12-month period in 1992-1993–have pursued diversification strategies. However, IPC Re is one of the exceptions to the rule of diversification. More than any other of its contemporaries, it has stuck to its knitting.

“From day one, when all eight companies said they intended to focus on
catastrophe reinsurance, we have done nothing but,” said James Bryce,
president and chief executive officer of IPC Re. “Some companies appear to have been distracted by the top line, while we have concentrated on the bottom line. Others have strayed into other
lines, become involved in Lloyds syndicates and so on, with varying degrees of success.”

Mr. Bryce said that his companys tight focus limits the number of
potential customers to “probably about 400 companies worldwide–companies with the ability to finish the race.” In other words, Mr. Bryce said, he wants stability from his customer base.

He said IPC Re is a catastrophe underwriter, so earnings can be volatile and vulnerable to erratic weather patterns.

“We cannot control the weather,” Mr. Bryce said, “but we do control our
underwriting, our investments are all top grade, and theres a matching of equity and bonds that has neutralized the volatility there. Our business is almost entirely broker-driven, as it always has been. Our retrocession level is low.”

Another company in the group of “Big Cats” is Renaissance Re, which stuck almost exclusively to catastrophe reinsurance throughout its formative years. Of late, it has diversified in two ways–joint ventures and new lines.

In two joint ventures, Renaissance Re provides the underwriting and its strategic partners provide the funding. One such joint venture, called Top Cat, is with Overseas Partners Cat Ltd., and another, Top Layer Re, is with State Farm Automobile Insurance.

As for new lines, Renaissance Re now offers accident and health, aviation, satellite and finite reinsurance. It also writes primary insurance, although this provided only 5 percent of net premiums in the first quarter of 2001, down from 9.8 percent a year earlier.

Renaissance Re has been among the most consistently strong performers of
the group. “In a quarter with a relatively high level of industry catastrophe losses, Renaissance again produced superior results, reflecting the high quality of our catastrophe reinsurance portfolio,” James N. Stanard, chairman, president and chief executive officer, said in a statement accompanying the release of second quarter 2001 figures.

Gross premiums written for the six months ended June 30, 2001
were $320.2 million, compared to $258.1 million for the same period last
year. Net premiums written for the six months ended June 30, 2001 were
$214.2 million, compared to $168.1 million for the same period in 2000.

Another company that had its roots as a catastrophe reinsurer is Partner Reinsurance, which is now a multiline insurer and reinsurer. Catastrophe coverage provided only 21 percent of Partner Res net premiums in the quarter ended March 31, 2001. Property (22 percent) is now the largest segment of Partner Res
business. It also writes casualty (14 percent), auto (14 percent), aviation (4 percent), and credit and surety (6 percent).

While the majority of Bermuda reinsurers have added life, health and
annuities to their armories, Partner Re has sold its North American life business. Life provided just 8 percent of its net premiums in the first quarter of 2001.

Tempest Reinsurance, which was formed by General Re and institutional
investors, was acquired by ACE in 1996 and is now called ACE Tempest Re. It has embarked upon a program of diversification aimed at transforming the subsidiary of the ACE Group into a leading global multiline reinsurer.

ACE Tempest Re has established ACE Tempest Life Reinsurance, a Bermuda-based company offering life, annuity and health reinsurance worldwide.

A separate operation focusing on non-catastrophe property-casualty business has been launched in the United States, with another startup operation in London. Property-catastrophe reinsurance, however, remains Bermuda-based for ACE Tempest Re.

“The distinguishing feature of our continued expansion into other lines of reinsurance is carefully planned organic growth,” said Chris McKeown, president and chief underwriting officer of ACE Tempest Re-USA.

The real opportunity for catastrophe reinsurers, Sean Ringsted, chief operating officer for ACE Tempest Re, told National Underwriter, is to co-exist as “transformers”–those that transform insurance products and risks into financial products and risks, and vice versa.

“We see ourselves at the high end of the spectrum of the traditional property-catastrophe market, with our core skill sets being risk quantification, portfolio management and price adequacy,” he said. “These same skills also allow us to bundle risks into a financial packages suitable for the capital markets.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 10, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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