Ian-driven rate hikes unlikely to lure more property-cat capacity
Uncertainty around climate change, inflation and the five-year loss record in the cat space will outweigh the temptation to commit more
Even a further spike in rates driven by losses from Hurricane Ian is unlikely to be enough to tempt meaningful levels of new capacity into the property-cat reinsurance space, heralding a market comparable with the post-Hurricane Andrew period in 1993.
That is the view of Mark Vaughan, deputy head of treaty reinsurance at Beazley. While he acknowledges that some carriers, including Beazley, might be tempted to commit a little more capacity, uncertainty around climate change, inflation and the five-year loss record in the cat space will largely outweigh the temptation to commit more.
He stresses that the industry needs significant structural change in price and terms across all markets for confidence to flow back—rate increases alone post-Ian are not enough to bridge the gap.
“There are small pockets among reinsurers that could increase by a small margin,” Vaughan told APCIA Today. “But it is hard to see anyone walking in and significantly increasing capacity.”
This means a change in dynamic in the market. He predicts that many cedants will end up doing private deals with reinsurers to secure the treaty capacity they need for the 1/1 renewal, outside of any form of open bidding.
A sneak preview: more exclusive content and interviews inside
A sneak preview: more exclusive content and interviews inside
Reinsurers exist ‘to absorb shocks and volatility’
Reinsurers should look for opportunities now, instead of only challenges: TigerRisk’s Wade Gulbransen.
The reinsurance industry should remember that its core role should be to act as a shock absorber, able to help insurers better manage volatility. Their mission is to manage this volatility rather than run away from it—and their clients need that more than ever.
That is the stark message that Wade Gulbransen, head of North America, TigerRisk Partners, offers ahead of the annual APCIA conference as the markets grapple with challenges on many fronts and a hard market only likely to get harder in the aftermath of Hurricane Ian.
He believes TigerRisk is well placed to help. “Tiger hurtles towards challenges such as this, which are also opportunities,” he told APCIA Today.
“We have had the perfect cocktail of challenges hitting the industry from all sides: from inflation to geopolitical uncertainty to many years of attritional cat losses to uncertainty over the impact of climate change. And now we have Hurricane Ian. But in times like these, insurers look to their brokers, and we are ready to respond.”
