Allianz Says Hedge Funds Without Expertise Are Good PartnersJonathan Levin and Sonali Basak
Chris Fischer Hirs, the head of Allianz SE’s specialty insurance business, said he welcomes the growing participation of Wall Street in the insurance industry as an opportunity, not a threat.
“Hedge funds bring capacity to the market,” Fischer Hirs said in an interview in Rio de Janeiro Wednesday. “Do they bring expertise? No. And what are we good at? We’re good at underwriting risk.”
Pension and hedge funds have been plowing money into weather-related bets and other insurance risks as they seek wagers that aren’t correlated with financial markets. The ventures also offer a chance for better returns than what’s available on most debt investments in low-yield countries such as the U.S.
While billionaire Warren Buffett has said hedge funds could make reinsurance less profitable by driving down prices, insurers like Ace Ltd. and XL Group Plc have cited opportunities in partnering with Wall Street.
“The expertise we have, the understanding we have, the comprehensive offering -- hedge funds can’t copy that,” said Fischer Hirs, whose unit is Allianz Global Corporate & Specialty. “To us, they’re just capacity. If we can make use of their capacity, let’s go do it. But they’re not a threat.”
Fischer Hirs joins Buffett’s Berkshire Hathaway Inc. in citing the commitment of traditional insurance companies to the market, and contrasting that with the approach of the newcomers.
“Hedge funds are looking for yield,” he said. “Now, whether these hedge funds will be around when yield picks up again, we don’t know.”
Fischer Hirs, 53, served as chief financial officer before becoming CEO in January. Speaking on a trip around Brazil, he said he expects South America’s largest economy to remain Allianz’s biggest market on the continent.
“You have to get Brazil right, first,” Fischer Hirs said. “That’s our hub. It’s the largest insurance market in South America, so you have to get that right.”
Still, his goal is to double the portion of South American premium revenue that comes from outside of Brazil to 30 percent. He said other priorities include Chile, Argentina, Peru and Colombia.
Angelo Colombo, chief executive officer of the South American unit for the specialty operation, said in the interview that premium income has grown this year despite an economic contraction in Brazil. He said he expects premiums to climb at a compound annual growth rate of 15 percent in the coming years.
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