Insurers and reinsurers today face a more uncertain environment than ever before. Just as volatile capital markets, deep recession and rising inflation are squeezing access to capital, changes in reinsurance buying behavior, lower risk-free rates in government securities, the uncertainty of loss trends and increased regulation, threaten to depress reinsurers’ growth and profitability.

All this highlights how important it is to be well-positioned in the market, to anticipate extreme events and to create stability by minimizing the operational, economic and strategic risks to clients and shareholders.

Acquiring another company is one way to minimize those risks. In the best case scenario, a well-planned, well-executed acquisition brings additional capital, financial flexibility, increased diversification and new talent and skills to an organization. Clients of both organizations benefit from doing business with a larger, stronger reinsurance partner that is highly capitalized and highly diversified.

The decision to acquire another company is never undertaken lightly however, since the risk around integrating two companies can be significant. In the case of PARIS RE, we determined that the benefits far outweighed the potential risk. By acquiring PARIS RE, a company currently with $2 billion in capital, a compatible book of reinsurance business and solid technical skills, PartnerRe will be able to offer our clients higher risk limits, access to a broader base of expertise and an unquestioned ability to pay claims no matter what the environment.

Another risk of acquisition is that the acquiring company loses its identity which is why we regard our acquisition of PARIS RE as an evolutionary acquisition; as additive rather than transformational. We are creating a more stable, more secure version of the company we have today with the same strategy, infrastructure, underwriting process, values and risk management philosophy.

I was recently asked whether PartnerRe, already a top 10 reinsurance company, would really have been at a disadvantage without this acquisition.The short answer is no – we emerged from the financial crisis of the last two years and some of the worst natural catastrophes in history, with minimal damage to our capital and with our people, systems and strategy intact. But in fact, this transaction is less about where we are today and more about assuring PartnerRe’s long-term future based on a stronger capital base and a more diversified book.

While our strategy in recent years has indeed proven successful, success can breed arrogance and an overly rigid adherence to the tried and tested. An acquisition is a good time to take a fresh look at our business and to check that the principles, processes and infrastructure that have guided us successfully through the last ten years will carry us through the next ten.