A $30 billion increase in loss costs last year must drive the market to support sustained price increases, Jill Beggs, Everest Re’s head of North America Reinsurance, told Monte Carlo Today.

She referred to a McKinsey study that came out last month which showed that rising prices caused a $30 billion increase in loss costs in 2021 above historical loss trends. That was driven by the cost of parts, labour and materials, and supply chain issues.

“We’re hearing of moderating rates in certain lines, but we have serious headwinds, so that’s really top of mind for us,” Beggs said.

“We and the primary market need to continue to articulate the need for sustained rate increases, so that they and primary brokers are able to explain to the ultimate customer why rates need to sustain increases,” she stressed.

Warning against “rate fatigue”, she said, is “front and centre for Everest Re at Monte Carlo and for 1/1”.

On specific classes, Beggs said that in the property space, Everest believes the problem is “simply a supply-and-demand issue”.

Insurance-to-value was a big topic of conversation in 2021 and has since been “exacerbated” by inflationary pressure.

“Total insurable values are up, markets are pulling out, ILS capacity is down from its peak in 2017, so there’s a need for property capacity. We saw the impacts play out in June and July in the Florida renewals where we wrote a substantial amount of shortfall covers to get programmes completed in the Florida marketplace,” Beggs said.

In the casualty lines, there has been a slight shift from what was seen at 1/1. “There are social and economic inflation concerns,” she added.

Specialty lines have been impacted by the war in Ukraine—marine and aviation in particular, she said—and there will be rate and term changes as a result.

“We expect to see composite treaties being split, with aviation and war coming out of marine, and a tightening of war exclusion language as well.”

Balanced and diversified

On business at Everest Re, where Beggs started her career and which she rejoined last year, she said these were “exciting times” with a “super-talented team” of longstanding employees combined with new talent.

The company’s North America portfolio is worth $5 billion, she said, and includes treaty business written in the US, Canada and Bermuda “across all lines”.

Everest Re has worked over the past few years to create a more balanced and diversified portfolio, Beggs said. Its split of property:casualty writings in North America is now about 50:50, which is a change from 65:35 as recently as 18 months ago.

“We’ve pulled our nat cat writings back a bit, but we are still looking for opportunities to grow. We have capacity and feel we have a good balance right now,” she said.

Everest is in a good position, she continued, “to react quickly and in a very agile fashion”.

“That’s our signature, the value proposition that we bring to the market.”

Market conditions in North America have steadily improved throughout 2022, she noted.

“In the property space, we saw a dramatic change from 1/1 to the June and July renewals with capacity constricted. And we see this momentum continuing with further hardening expected at 1/1,” she said.

“We feel we’re at an inflection point on the casualty side of the market and we expect continuing hardening as casualty has demonstrated in the last round of renewals post 1/1 in 2022,” she added.