The idea of a widespread cat capacity crisis is “nonsense”. Capacity is available and the largest European reinsurers are even willing to write more—with the exception of US cat peak zone risks, James Vickers, chairman, international, reinsurance, Gallagher Re, told Monte Carlo Today.

“Everywhere else, it comes down to price and terms and conditions,” he said. “Yes, we have seen some carriers withdraw but the biggest players are leaning into this space. And our overwhelming sense from the Rendez-Vous so far is that more reinsurers are talking about growing than shrinking.

“Many see that prices are moving in the right direction, towards realistic levels. It is a case of now or never; people want to grow. Some of the headlines about capital shrinking is simply because of unrealised losses on investments. Regulatory capital is very robust,” Vickers said.

He believes most reinsurers value a deep, long-term relationship with cedants that spans multiple lines. “If you write one line and there is a loss, it is a problem. If you write multiple lines and there is a loss on just one, it is less of an issue,” Vickers said.

“Also, if you have written a cedant’s tricky cat layer now, you are more likely to get first dibs on other business. Those that have withdrawn from cat and are talking about expanding, might not find that.”

He believes that capacity from the insurance-linked securities (ILS) side will re-enter the space, although it can take time. “I hope ILS capacity returns; it is needed to ease the situation in the US.”

On the casualty side, he said, the market is more complex. Capacity is moving in but some carriers are moving in the opposite direction.

Difficult renewals

Vickers agrees that market conditions and the renewals negotiations will be the most challenging the industry has seen in a long time. In such a scenario, he believes experienced brokers who have been through hardening markets before have an advantage.

“The market is hard in certain places, for the most part it is just hardening,” he said. “But that still presents challenges we have not seen for maybe 15 years. That is where the more experienced brokers, who will have seen a number of hard markets, come to the fore.”

Gallagher Re has an advantage because all its senior leaders are true brokers, he said.

“Their role is to help and mentor younger members of staff to ready them for what to expect in these market conditions. We are doing tutorials for younger talent. Not all brokers have leaders who can do that,” he said.

“We are trying to understand reinsurers’ risk appetites and manage our clients’ expectations properly. Yes, prices are up but not in every line. Yes, inflation is an issue, but a huge amount of work is being done on understanding the impact of that in specific insurers so that reinsurers do not apply some form of blanket increase.

“Our role is to bring together clients and reinsurers.”

No missed beats

This year-end renewal is the first Gallagher Re (previously Willis Re) is approaching since the business’s acquisition by Gallagher in December 2001 in a $3.2 billion deal. Vickers was previously chairman of Willis Re International. He said that the feedback from clients has been that the change has happened very smoothly “without missing a beat”.

In part, he attributes this to the loyalty of clients, who were unhappy at the prosect of Willis Re being acquired by Aon, a deal that was stymied by regulators in July 2021 over monopoly concerns.

“We have lost almost no business. The clients that protested at the idea of there being only two big reinsurance brokers [which would have resulted from the Aon deal] have followed through and supported us,” Vickers explained.

He believes that, in challenging market conditions, size is no advantage as a broker—it is more about experience and the culture underpinning the business. He stresses that, under Gallagher, the reinsurance unit has a much deeper pool of talent and access to analytics and technology.

Compared with culture, this can only ever offer a short-term advantage, however. “Everyone is spending a lot on technology—developing the next mouse trap. It is a constant war,” he said. “But whatever one broker develops, it is never long until the rest catch up. A true long-lasting differentiator can only be achieved through culture.”

The culture in Gallagher Re is about willing collaboration and working as one team, Vickers said. “There is a single P&L and the free flow of knowledge and expertise is encouraged throughout the business. We have 50 overseas offices. We have recruited some 350 people in the past year. We want everyone to think like that: ‘The Gallagher Way’.

“Reinsurance is ultimately about knowledge and relationships. We need to ensure that the expertise we have is fully available to deliver for our clients at all times. This Monte Carlo is our first major event as Gallagher Re and that is the message we are giving clients,” he said.

The Gallagher Way to which he refers is a 25-point code of ethics and tenets designed to underpin the culture of the business. It was first put on paper by Robert E Gallagher, then chairman, over a decade ago.

The company sums it up as follows: “As proud as we are of our growth, we’re more proud that we’ve been able to maintain Gallagher’s unique culture as we move into new markets and new lines. It’s a culture of ethics and service. One of collaboration in a common interest—the best interest of every client, everywhere. And it’s summed up in the 25 tenets of The Gallagher Way.”