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Swiss Re Canada CEO: New Rules for Banks Could Mean More Business for Reinsurers

Source: BestWeek

Posted on 23 Apr 2010

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New rules regulating Canadian banks could benefit Swiss Re in Canada, the company's newly appointed chief executive officer said.

Sharon Ludlow has been appointed CEO of Swiss Re in Canada and head of Canadian & English Caribbean operations, effective June 1. She takes the helm from Jean-Jacques Henchoz, who is returning to Switzerland after five years in Canada.

Ludlow will be based in Toronto, where she'll oversee Swiss Re's 180 employees there, and be responsible for the company's life/health and property/casualty business.

Ludlow, who is being promoted from chief financial officer of Swiss Re in Canada, said Swiss Re has an opportunity to gain business by helping Canadian banks that own insurance companies deal with new rules regulating bank capital.

Known as Basel III, the new rules could impact how much capital banks are required to hold for their insurance subsidiaries, she said.

"It appears it will be more punitive for a bank to hold an insurance company directly," Ludlow said. "The more you reinsure, especially with a Canadian reinsurer, the less you'd have to hold at the subsidiary level. It's opening doors to opportunities for us."

Another concern is the potential impact of Solvency II, the new solvency standard for insurers that is set to take effect in the European Union toward the end of 2012. Canada is several years behind Europe in implementing similar capital requirements, which gives the country the benefit of seeing what happens in Europe first, she said.

"We can work with Canadian regulators to make sure we shape the solvency regime in the right way. We, and the regulators, don't want the end result that companies are worse off than they are today from a solvency perspective," Ludlow said.

Canada was virtually unscathed by the financial crisis, she said, noting that when companies were negatively impacted on the asset side, they were immediately able to raise more capital to support their solvency position.

"If there's any lessons to be learned for all industries, it's that companies will have to do a much more rigorous stress test for regulators to see what happens if three or four macroeconomic factors hit the company at the same time," Ludlow said.

In terms of market pricing on the property/casualty side, Ludlow said, "We are certainly not in a hard market by any stretch of the imagination. There's still some softening in prices."

She said Canadian automobile insurance is "a very difficult market." Ontario has released changes to its auto market that the insurance industry is generally pleased with, "but the devil is in the details, and it will take several months before we know what the impact is," Ludlow said.

In the Caribbean, natural catastrophes are the single biggest risk insurers face, she said, noting the earthquakes earlier this year in Haiti and Chile could have some effect on catastrophe renewals for January 2011, "but we have some time to see how that plays out."

The life market is dominated by three or four life insurance companies and a handful of reinsurers, she said. Swiss Re has been able to work with clients to help reduce financial strains, Ludlow said.

Before joining Swiss Re, Ludlow a vice president of finance and administration for Liberty International Underwriters Canada.

Swiss Re's subsidiaries currently have Best's Financial Strength Ratings of A (Excellent).