ROUNDTABLE: REINSURANCE
Q1: HOW WOULD YOU CHARACTERISE MARKET CONDITIONS FOR REINSURERS?
“ Reinsurers are at an inflexion point right now.”
Paul Simons
Paul Simons: I head the property unit for our global markets segment and I also lead our Bermuda reinsurance division.
The reinsurance market is always fascinating, and I believe it will be even more fascinating in 2022.
The last five years have been difficult due to significant cat activity and resulting losses; 2021 has been no exception. The frequency and intensity of cat events have increased.
As a result, profitability in this line has been hampered. Reinsurers are at an inflexion point right now. The dynamic is evolving but we see this as a chance to continue to differentiate ourselves as a market offering leadership to clients and brokers.
“We are focused on connecting risk to capital.”
Adam Champion
Adam Champion: We are creating a new reinsurance business and a capital markets team here in Bermuda. We primarily work with startups, new funds, institutional investors, and other local carriers in the reinsurance and capital markets arena.
We are focused on connecting risk to capital; assisting clients in developing new structures to attract third party capital.
We are fortunate to already have a number of mandates with new startups, both in the traditional rated balance sheet and the insurance-linked securities (ILS) space.
“I’d characterise the market as still hard.”
Anup Seth
Anup Seth: I’m the global leader of Aon’s Underwriting Solutions, which includes our global ILS and commercial reinsurance advisory businesses, as well as our protected cell firm.
I’d characterise the market as still hard, but the level of rate increases for the traditional P&C lines of business is beginning to decelerate.
Christian Dunleavy: I’m the chief underwriting officer for Aspen Re and the chief executive officer of Aspen Bermuda, Aspen’s Bermuda operating entity. I manage group cat risk and exposure management.
I agree that it’s a tough market. It isn’t easy in places, and there’s a distinction to be made between insurance and reinsurance.>>>
“That will keep a floor under pricing conditions.”
Christian Dunleavy
<<< I’d say the reinsurance market specifically is difficult. It’s better than it was but it’s not yet at long-term sustainable pricing levels. Even though a significant amount of rate has flowed in across several classes, results have yet to materialise.
You could argue that we’re approaching hard market rates, but you’ve not seen hard market results yet. That will keep a floor under pricing conditions.
But there is a lot of uncertainty. From my perspective, this means that we will continue to be in a relatively strong underwriting environment for the next couple of years.
“Reinsurers are struggling to deliver risk-adjusted returns.”
Matt Britten
Matt Britten: I’m a partner with PwC Bermuda, and my primary responsibility is to lead our risk assurance practice, from which we provide risk and controls-related services to all of our clients. In addition, I lead a team that focuses on audits of commercial insurers and reinsurers in Bermuda.
In terms of some high-level observations, the market has handled the operational and financial challenges of the pandemic admirably. The market is still well capitalised despite four to five years of significant losses.
However, as a result reinsurers are struggling to deliver risk-adjusted returns. And that is problematic.
So it’s a tough market, but is the market going to get hard enough to allow reinsurers to meet and exceed their cost of capital? If it’s a hard market, where are the hard market profits?
“The reinsurance side is a very dynamic and changing market.”
Josephine Noddings
Josephine Noddings: I work as a senior associate for Appleby in the insurance team. The reinsurance side is a very dynamic and changing market at the moment.
Because of the difficulties that reinsurers have faced in recent years, they are rethinking how they structure and conduct business to deliver profits to investors.
It’s an exciting time to be in the reinsurance space and watch how it develops and grows.
Hopefully the market will harden, and we’ll be able to experiment with what we do with those profits, how we structure them, and how we deliver them to investors.
“The top-line conversation is around climate change”
John Huff
John Huff: I am the chief executive officer of the Association of Bermuda Insurers and Reinsurers, the Island’s most established trade group. I’m a little more optimistic. There has been a shift in the last few weeks in the P&C space.
Some describe it as an improving market driven by the significant losses from Hurricane Ida and the flood events in the US and Europe. Unsurprisingly, the top-line conversation is around climate change and what it might mean for our industry.
After some of the results we have seen, it will be interesting to see if some companies limit how much capital they deploy in the cat cat space and what that means for the market. >>>
<<< I am keeping a close eye on the retro markets.
My understanding is that analysts believe the insurance side drove the rate we saw in 2021, whereas the rate we will see in 2022 will be driven by reinsurance and retro. I thought it is a unique perspective.
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