The reinsurance industry must develop more respect for its capital, a leading insurance executive told attendees at Convergence 2022, presented by ILS Bermuda.

Albert Benchimol, president and CEO of Axis Capital, said: “The reason we need reinsurers is because there is a set pattern for different roles along the risk value chain – and the value of reinsurers is they help diversify volatility.

“At the end of the tail, they provide a significant amount of stability that helps the primary companies succeed and deliver their more stable results, and ultimately it helps the insureds on the front end.

“I think the absence of the reinsurance industry would cause a significant amount of hardship along the curve.”

But he added: “The world doesn’t need the reinsurance industry of the last five or ten years. It needs a new, more disciplined reinsurance industry that has more respect for its capital – and my hope is that we are going to start to see that.”

Mr Benchimol was speaking on the panel “New Dimensions: What is the Future for Reinsurers?”

He was joined by Kathleen Reardon, CEO, Hiscox Re & ILS; Mike Millette, managing partner, Hudson Structured Capital Management; and Peter Bell, CEO, Everest Reinsurance Bermuda.

The moderator was Andre Perez, chairman of Las Olas Holdings, who kicked off proceedings by asking panellists if the world needed reinsurers.

Ms Reardon said: “Yes, reinsurers are needed. Reinsurers make the world turn. Without it, insurance companies cannot function efficiently.”

She said reinsurance “keeps the wheels turning, the lights on in the economy” – and is “absolutely necessary”.

Mr Bell said life has to change for reinsurers.

He said: “It’s a question of making sure that we price the product properly, and also understand what product we actually want to get out. It’s just going back to basics.”

Mr Benchimol added: “We might not need a huge amount of capital in the reinsurance industry if the reinsurance industry just focused on where it’s needed, and where it can get an adequate return.

“We also have to recognise that over the last 20 years some global companies have gotten significantly larger than their reinsurers, and they could easily absorb the volatility in many lines of business.

“For many of those customers, they buy reinsurance because in some cases, reinsurance subsidises their results.

“They get paid incredibly generous ceding commissions, they get nice caps on their losses and so on, but they could afford to hold onto the risk. Literally, they are being paid to get rid of the risk.

“I think there are some customers that we have to recognise, we really can’t add a lot of value to. So let’s not try to make the only value that we provide, subsidising their results.”

The conference at Hamilton Princess and Beach Club attracted attendees from the alternative reinsurance, convergence and insurance-linked securities marketplace who came together for the first time in three years for networking and education sessions.