ROUNDTABLE: REINSURANCE
WHERE DO CARRIERS SEE GROWTH COMING FROM GIVEN THESE MARKET CONDITIONS?
“Cyber is one of the market segments where you see the highest rate.”
Jerome Halgan
Conor Gaffney: The first aspect of growth is that from the rate hardening we are seeing. There has to be a rebalance in the supply:demand equation; a reduction in capacity in order for rates to increase. On the property side, I can’t see people growing their books until there is a rebalancing of that supply:demand equation.
There is growth in speciality lines. With the Ukrainian crisis, there is growth around lines such as political violence, aviation, war, political risk, trade credit. All of those classes have been impacted and a number of reinsurers will look to deploy capacity there—away from property cat.
Jerome Halgan: When you consider growth, inflation will influence that. Just by renewing their portfolio next year, carriers should be able to grow premium by 10 percent or more as rate changes are expected to be well into positive territory as a whole. That’s generally a good thing for reinsurers.
Cyber is one of the market segments where you see the highest rate and demand increases as well as a good amount of first-time buyers, so there are plenty of growth opportunities here. It is a very difficult and technical line of business and has a high degree of systemic risk, so the appetite for growth will vary greatly between capacity providers.
Peter Bell: We have seen strong growth on the mortgage reinsurance side in recent years. There has been a lot more issuance into that space. That may slow now and the housing market is going to be a little bit tougher, but that’s been a big space for growth. >>>
“We write most of our cyber through one of our MGA partnerships.”
Tim Mardon
<<< Cyber is a tough market, but it’s definitely going to get bigger. We’re evaluating where we think the market is really going. Other areas of growth might be around structured risk transfer from the European banks. There is demand but those deals take a lot longer to get over the line. It means a lot more work around them, but there are definitely opportunities.
Tim Mardon: We have grown via managing general agent (MGA) partnerships which, for us, have been focused on lines of business that are not cat-exposed, both insurtech and traditional E&S lines. We are writing cat on the traditional reinsurance side. I’m not quite sure what capital availability, balance sheet and investment capital, will be for some of the insurtech MGAs going forward. But that’s going to be an interesting one to watch.
We see the MGA move as being an easier and more efficient way to grow an insurance franchise that will complement a reinsurance book. It can be difficult to make that move by building it yourself.
We write most of our cyber through one of our MGA partnerships, and agree it’s a growing risk and that’s going to be an interesting market going forward.
We have diversified away from a property-driven reinsurance book. We have grown casualty and specialty insurance through our MGA model. We’ve also invested in numerous partnerships, including in Florida, which may sound counterintuitive, but we think that when all the problems shake out, there is probably an opportunity—it just hasn’t happened yet.
“We’re trying to think of new ways to structure risk transfer solutions.”
Jessica Laird
Jessica Laird: We see lot of interest on environmental, social and corporate governance (ESG) business coming from the renewable energy and sustainability environment with a push to net zero.
That marketplace is very much in its infancy but as we see more disclosure requirements for companies, they are seeking risk transfer solutions to manage exposure, whether it’s crop or renewable energies or various lines that connect in some way to the transition to net zero.
The risk transfer solutions are attractive and can be solution-oriented, so we are trying to develop that marketplace. The solutions can come in many forms. Maybe some of them do exist already in specialty markets, but some could be new opportunities, so we’re trying to think of new ways to structure risk transfer solutions.
Brad Adderley: In terms of Bermuda generally, we’re seeing a lot of interest in cybersecurity and new insurtech companies. You’re going to see a lot more crypto insurance companies in the life space and the reinsurance space. It will be quite interesting.
How many of them are going to be successful? I’m not sure, but we get calls on a weekly basis. They’re all doing different lines. >>>
“We’re likely to see some additional required disclosures around ESG issues.”
Kent Howard
<<< There are not many jurisdictions that regulate crypto insurance, but that is exactly what the sandbox is for. Clients and investors want to know it’s properly regulated.
Kent Howard: We see continued interest in the crypto and blockchain-related startups but in terms of overall capital, it remains a small but growing piece of the Bermuda insurance market. The life reinsurance space is still red hot and fresh capital is ready to enter the market via new reinsurance launches.
The run-off/legacy insurance market remains robust but the space is beginning to feel slightly overcrowded as competition for deals makes for a seller-friendly environment.
Meanwhile ILS remains strong and we’ve seen a number of collateralised insurers launch over the past four months. We also see some interest in the longer tail casualty space.
On the regulatory front, we’re likely to see some additional required disclosures around ESG issues. It will be interesting to see if insurers are able to disclose comparable ESG information that is useful for investors and regulators.
Image courtesy of Shutterstock / Jennifer Sophie
