NEWS
Investors want sustainable profits before committing
Investors need to see a lot more than just six months of good results to be lured back to reinsurers.
Just six months of good results is nowhere near enough to lure capital markets investors into the reinsurance space—reinsurers have to prove they can post sustainable profits before capital is again attracted into the industry, Franz-Josef Hahn, chief executive, Peak Re, told Monte Carlo Today.
“Things are slowly turning, and we are seeing investors come into the insurance-linked securities market. But that is different. They have a very specific appetite. To put money into a balance sheet reinsurer is completely different. It is a very different risk,” he said.
Hahn agrees that market conditions are very good at the moment—probably the best he has seen since the late 1980s and early 1990s in the wake of the Lloyd’s LMX crisis and then Hurricane Andrew.
He says that property and casualty are both hardening now and he has not seen Asian markets moving in such a positive way for a long time.
He believes more upwards movement is possible. “Rates will hold and probably be stable but, if you recall, last year people said the same thing. Then Hurricane Ian hit and there were price increases. I would say the consensus this year is more towards slight increases overall,” he said.
“Rates will hold and probably be stable.”
Franz-Josef Hahn, Peak Re
Tackling the gap
Hahn’s passion, however, is around the potential growth he sees in Peak Re’s home markets in Asia. The region remains underinsured across the board, from property-cat exposures to life and health. But as the middle classes in many countries grow, so an opportunity to close this protection gap emerges—and Peak Re is keen to help its clients grasp this opportunity.
“That comes to the ethos of why we started Peak Re,” he said. “There is massive underinsurance across Asia and we want to help clients redress this balance.”
It does this by working closely with clients to develop new products, offering both the expertise and capacity to make them a reality.
It can do this from an increasingly good place, Hahn said. While it made a $81 million loss last year, that was heavily influenced by mark-to-market losses on its fixed-income investment portfolio and continued high levels of catastrophe losses. He said that most of the investment losses have now been accounted for, while it is enjoying the tailwinds of rate increases.
He notes that Peak Re repositioned and continued to further diversify its portfolio and realign its book in markets where losses stemming from nat cat events continued to increase.
It has grown its motor, accident & health and pecuniary business lines and consolidated its book, with Asia-Pacific now representing 61 percent of its GWP, the Americas with 23 percent and Europe, the Middle East and Africa contributing 13 percent.
Main image: Shutterstock / Felix Mizioznikov
