INTERVIEW: PIOTR NOWAKOWSKI, PEAK RE
Industry must change its risk mindset
The re/insurance industry must alter how it views certain new risks that didn’t exist years ago but have now become a reality, cautions Peak Re CUO.
One of the biggest challenges facing the reinsurance industry is that of changing its mindset. Risks that were not so prominent a few years ago have now become a factor to be reckoned with, such as secondary perils, which will account for the majority of catastrophe losses in 2023.
“How the industry approaches risk modelling and improves its tools must take into account the secondary perils, but also the high concentration of values in some markets in Europe and in the US, where we see that a small event could be a very costly event, despite its limited size,” says Piotr Nowakowski, chief underwriting officer at Peak Re.
“There is still a lot of work to be done on the modelling of natural catastrophes and, in particular, on the secondary perils that we are still missing,” he adds, noting that working on how to control, assess and monitor exposure is key.
Nowakowski says: “But this is also good for reinsurance to think about it, and to work very closely with the vendors. We are giving them our feedback and what we think about how we can approach the risk. There’s a regular exchange of views.”
The CUO addressed inflation, not only for the property business, but also social inflation from casualty lines of business and climate change, which he calls the “never-ending story”.
“We have the economic situation: interest rates and the cost of capital, which is impacting how we are doing business and what kind of return we want to achieve,” he says.
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“Retention and changing terms and conditions have been changing the face of the reinsurance market.”
Piotr Nowakowski, Peak Re
Nowakowski adds: “These challenges—which are very closely connected to the challenges our clients are facing in their markets, such as how to implement improvements, how to connect with the reinsurance market, and the retention of clients—are something we are discussing, because retention and changing terms and conditions have been changing the face of the reinsurance market for the last few renewals.”
A flourishing market
Nowakowski is confident that there is a good outlook for the re/insurance market in 2024, driven by positive renewals this year.
"We are still in an environment which is uncertain from economic and political points of view. But the industry is positive about the future,” he says, adding that there are plenty of opportunities stemming from fast-developing lines of business.
Peak Re is confident that cyber offers many opportunities for growth, with Nowakowski noting that alternative capital is now flowing into the cyber space, from investors with a short-term outlook and those with a longer view, such as pension funds.
“There are many opportunities in all regions. We are writing the business and in our regions we want to further develop our portfolio. The state of the market is I would say in a very good situation,” he adds.
“The reinsurance market is expecting that the same kind of hard market will continue for 2024.”
However, Nowakowski adds that, at the same time, Peak Re is very aware when allocating capacity to its cyber portfolio, that it still needs to be prepared and model not only a cyber event which could affect one market, but also a large cyber event that could affect many markets and clients.
The company is also seeing opportunities in the accident and health market, and has set its sights on these lines in Asia over the next year.
Nowakowski cited the importance of the understanding between insurance and reinsurance, which he believes is improving.
“The reinsurance market is expecting that the same kind of hard market will continue for 2024,” he says. "There is an understanding between insurance and reinsurance, that we need to work together on improvements, which need to be implemented in the underlying portfolios. This is obviously sometimes very difficult for our clients, because they have limited budget for reinsurance.”
Nowakowski adds: “Insurers need to think about their original clients, how to manage them and how to pass the price increase on to them. But I think that understanding is here—and this is very important—and no-one is giving up.”
Piotr Nowakowski is the chief underwriting officer of Peak Re. He can be contacted at: comms@peak-re.com
Main image: Shutterstock / Ash.B
