Hard market to last into 2021, with focus on diligent underwriting: Hiscox

The current hard market presents a period of opportunity for reinsurers, which should extend into next year, Andrew Dolphin, director of underwriting the reinsurance division at Hiscox, told Monte Carlo Today.

“At the moment our minds are very focused on business planning,” he said, adding that while the impact of COVID-19 is still unfolding, other events such as the Beirut explosion, the California wildfires and Hurricane Laura are also influencing thinking within the industry.

“They are a reminder of the need for good underwriting and the rate requirements we have going forward,” Dolphin said.

“With regard to COVID-19, it’s too early to talk about its impact on the reinsurance industry. A lot of the original insurance losses are within court cases, so it’s early days and also difficult to comment on how it’s affected our clients.

“At this stage, we haven’t seen losses materialise in a big way in the reinsurance space. It will likely be a year before we have any real certainty about what impact COVID-19 has had on the property insurance market.

“Another factor that is driving the hardening of the market is the issue, be it within insurance-linked securities funds or within collateralised reinsurance, around trapped collateral and the way people are holding back the cash in those pots to pay for a potential COVID-19 loss that we just don’t know about yet.”

Meanwhile, the impact of COVID-19 colours multiple other aspects of reinsurers’ work, right down to the way they conduct their meetings.

“Without some real effort, video calls don’t have that same impact as a face-to-face meeting, so we need to look at the opportunities this new way of working creates,” he said.

“Through group sessions, for example, there is the potential to do something quite neat in the way we talk to our clients and brokers and the way we present it.”

He added that the lack of a Monte Carlo Rendez-Vous this year is not necessarily a bad thing.

“This year I think people are quite grateful for the lack of it as it would be too early to have sensible conversations about the impact of COVID-19,” he said.

“From that perspective we’re looking at moving towards more meaningful conversations in late September and early October, and we’re figuring out how, with a lack of the usual conferences, we will engage with brokers and clients over the next few months.”

He expects hot topics of conversation to include not only the impact of COVID-19 but also silent cyber and the push for it to be specifically included or excluded from reinsurance contracts.

Communicable disease exclusions will be another area of interest.

Know your risk

Looking to the future, Dolphin predicts a strong focus on good underwriting and fully understanding the risks.

“For us, in the cat side of the business, that involves ensuring we have reviewed all the cat models and are comfortable that we understand the perils we are covering,” he said.

“The other important thing for us is remembering to focus on the customer. In a hardening market it can be easy to get carried away, but we are looking to build strong relationships with our partners and being more to them than just capacity.”

Main image: / Ruslan Grumble

“There is the potential to do something quite neat in the way we talk to our clients and brokers.”

Andrew Dolphin, Hiscox