ROUNDTABLE: REINSURANCE
WHAT ABOUT THE CASUALTY SIDE: ARE WE SEEING SIMILAR MARKET CONDITIONS THERE?
“There has been an increase in specialty.”
Peter Bell
Brad Adderley: Rates have improved for several years but as people are leaving the cat market, that is now flattening, driven by the increased competition.
Peter Bell: Yes, there has been an increase in specialty and more pressure on casualty as people have been forcing their way into those lines. Cedes have increased to a level now where they cannot go up more.
Conor Gaffney: In terms of property cat, many players will wait until the wind season is over because so much depends on that. That will determine where they’re setting their risk appetite. It will also be driven by the risk appetite of the retro players.
If their appetite changes significantly post a loss event it could be completely different outcome. People are reluctant to nail their colours to the mast until the wind season has played out.
“People are reluctant to nail their colours to the mast.”
Conor Gaffney
Adderley: I agree. If it is a bad wind season, all bets are off.
Gaffney: When you also overlay the macroeconomic factors, most reinsurers are trying to reduce their exposures, especially to covers offering aggregate protection. That has a knock-on effect. If people can’t purchase their aggregate covers, it’s going to change their risk appetite; they will have to change their inwards writings as a result.
So it’s going to depend on how the wind season transpires. It could be mid-October before we know much of this.
Jerome Halgan: It also depends on clarity, on price. We have enough capital to do a lot more than we’re doing in the property space but, given where the price is, we’re happy with our existing book.
For us to write more business, we need something to change. It’s simply a question of supply and demand but it can be hard to find a level that satisfies both the buyer and the seller.
“Supply will increase as price goes up.”
Jessica Laird
Jessica Laird: Available capacity will also depend on where prices will clear on renewal. At Arch, we have enough capital to do more than what we’re doing currently in the property cat space but to do so we would seek to obtain improved margins.
It’s simply a question of supply and demand—supply will increase as price goes up but it may be hard to find a level that satisfies both the buyer and the seller.
Adderley: It will also be a lot harder to place multi-year contracts; people are too worried about inflation.
Tim Mardon: Everyone’s cutting back on multi-years. One issue is that if you offer multi-year but you can buy your retro only on a 12-month basis you get an imbalance.
“Most of these issues are around US cat business.”
Tim Mardon
Halgan: Unless you are a very high quality client it will be very hard to find multi-year support—or certainly more expensive.
Gaffney: Capacity has dried up over the past 12 months; there’s very little multi-year capacity available now.
Adderley: All we’re hearing is rates are becoming harder; terms are also getting tighter. There has been a bit of a snowball effect.
Mardon: Most of these issues are around US cat business specifically. We’re not seeing the same issues in other territories.
Gaffney: There are pockets in the international cat space. Australia has a supply-demand imbalance. The modelling perhaps isn’t as sophisticated as the US. We’ve seen raised retentions, increased prices, and certain coverages historically offered are now unavailable.
Image courtesy of Shutterstock / Triff
