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Market segmentation, performance differences and strategic orientation - the case of German reinsurers

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Zeitschrift für die gesamte Versicherungswissenschaft

Abstract

We apply the concept of strategic groups to the German reinsurance market. We use a cluster analysis to subdivide reinsurance companies into strategic groups and analyze the effect of a set of strategic choice variables on their performance. Furthermore, we examine the impact of the financial crisis of 2008 on the reinsurance sector. Our dataset encompasses 142 firm-year observations for the years 2004 until 2012. Our results indicate the existence of three strategic groups in the German reinsurance market. Moreover, we find that most strategic choice variables that characterize the individual strategic groups affect the reinsurers’ level of performance. Finally, we find that the reinsurers’ performance increased in the aftermath of the financial crisis. This holds in particular for professional reinsurance companies.

Zusammenfassung

Wir analysieren strategische Gruppen im deutschen Rückversicherungsmarkt. Wir verwenden eine Clusteranalyse, um Rückversicherungsunternehmen in strategische Gruppen zu unterteilen. Anschließend untersuchen wir den Einfluss von Faktoren, welche die Strategie der Unternehmen charakterisieren, auf deren Performance. Unser Datensatz umfasst 142 Firmenjahr-Beobachtungen der Jahre 2004 bis 2012. Unsere Analyse weist auf die Existenz von drei strategischen Gruppen im deutschen Rückversicherungsmarkt hin. Des Weiteren zeigen unsere Ergebnisse, dass Faktoren, welche die Strategie der Unternehmen charakterisieren, auch deren Performance signifikant beeinflussen. Zudem deuten unsere Ergebnisse auf einen Anstieg der Performance der Rückversicherer im Anschluss an die Finanzkrise hin. Dies gilt insbesondere für professionelle Rückversicherer.

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Notes

  1. Companies within one strategic group are assumed to have the same characteristics with respect to strategic orientation, assets, technologies or competency (Aaker and McLoughlin 2010).

  2. Reinsurance originating from German reinsurance firms accounted for 28.4 % of the world reinsurance premiums in 2010, making Germany the leading host country in the reinsurance market since the 1980s (Outreville 2012).

  3. Since our study only captures reinsurers that write premiums in Germany, we eliminate Hannover Rück SE from our dataset, as the German business is run by its subsidiary E + S Rückversicherung AG.

  4. Variable definitions are provided in Table 2.

  5. A more precise measure of the reinsurer’s degree of internationalization would include its premiums written abroad. However, this information is not available in our data set.

  6. These techniques include underwriting policy, diversification, limit systems, retrocessions and accumulation control.

  7. Outreville (2012) shows that Munich Re is also the global market leader in the worldwide reinsurance market since the 1980s.

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Authors and Affiliations

  1. Department of Risk Management and Insurance, University of Cologne, Albertus-Magnus- Platz, 50923, Cologne, Germany

    Muhammed Altuntas, Christian Bernhardt & Jannes Rauch

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  1. Muhammed Altuntas
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  2. Christian Bernhardt
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  3. Jannes Rauch
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Correspondence to Muhammed Altuntas.

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Altuntas, M., Bernhardt, C. & Rauch, J. Market segmentation, performance differences and strategic orientation - the case of German reinsurers. ZVersWiss 105, 51–67 (2016). https://doi.org/10.1007/s12297-016-0330-5

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