As many of you will know, I retire as CEO on December 31 this year. After 10 years in the job, it is, by my reckoning, time to step down. As I hand over my responsibilities to my successor, it is an opportune time to take a look back at the reinsurance industry and how it has evolved over that time.
 
In 2000 when I was appointed CEO, reinsurance was considered more of a craft than a disciplined profession. Back then, it was a high-risk, low-return industry and there were plenty of examples of reinsurers that fell by the wayside, either because they took too much risk and blew up, or they didn’t take enough risk and failed to grow with the market. Risk management was not as sophisticated as it is today. Most reinsurers relied on combined ratios instead of return on equity to tell them if they were making money. Not surprisingly, they weren’t especially forthcoming with information on their reserves, risk appetite or limits – all of which are fundamental indicators of a reinsurer’s financial strength and ability to withstand large shock losses.
 
A decade on, reinsurance has become a far more professional and well-respected profession. The concept of risk management in terms of risk appetite and limits, working within an overall risk framework, is now firmly embedded within the industry. Today, compared with the overleveraged banks and hedge funds that relied too heavily on models to assess risk, reinsurance is at the cutting edge of risk management practice.

As we as an industry have put these pieces in place, we have also become more transparent – publishing our reserves, risk appetite and limits – so that our clients and shareholders are no longer dependent on ratings agencies. Instead, they have the information to judge for themselves whether a reinsurer is likely to honor its promise to pay its claims.

While the next few years will bring new challenges for the reinsurance industry, I strongly believe that the industry, and PartnerRe in particular, under the leadership of Costas Miranthis, is better positioned than ever before. High risk, low return has been replaced by moderate risk, moderate return for shareholders and more stable, financially stronger and better managed partners for our clients. The partnership between PartnerRe and its cedants is only likely to get stronger as our clients become better informed seekers of risk transfer products and we become better at providing those products.
 
As for the next 10 years, I look forward to following the continued evolution of the industry with great interest.