NEWS
Brit bullish on outlook as inflation concerns drop down agenda
Inflation concerns drop down agenda as focus shifts to property trends, says Jon Sullivan.
“The next 12, 24 months, maybe even 36 months, look to be a very positive underwriting environment; we’re excited about the outlook.”
This was the view of Jon Sullivan, deputy group chief underwriting officer at Brit Insurance and active underwriter for syndicate 2987. Asked about the market and 1/1 renewals, he said he was looking forward to an improvement after the long soft market and associated challenges.
In contrast, the last 12 to 18 months, depending on the class you’re in, have delivered much improved rates and terms and conditions, he told Monte Carlo Today.
For Sullivan, the trend to watch is on the property side as the market takes action to cope with losses from so-called secondary perils such as hail, winter storms, and wildfires. He added: “Wildfires, obviously, are a very dramatic peril, flood too, and hail. You’re seeing pictures of people holding cricket ball-sized hailstones in various spots in the world.
“You’ll probably get different answers from different underwriters, because it depends on how it impacts your book. But your focus becomes more acute when it’s hurting the balance sheet.”
Sullivan said that more of these losses are now falling on insurers since reinsurers have restructured programmes. “They’re challenging perils, they’re losses we’re not expecting. It’s not just a case of our charging more. With some perils, potentially, we weren’t charging anything, or certainly not enough.
“We have to recalculate and think again about how we were putting some of these property perils on the books. That’s probably the biggest area for us.”
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“Your focus becomes more acute when it’s hurting the balance sheet.”
Jon Sullivan
Sullivan said he was still watching inflation, but that Brit is “comfortable with where it is” especially compared to 12 months ago.
“We’re not going to try to forecast where inflation is going. But we don’t think it’s going to go rocketing up so much. We feel we have a good handle on that,” he said.
In terms of the potential for Brit at 1/1 and beyond, he said that across much of the book there is improvement in rates and in terms and conditions.
He’s seen this happening over the past 12 months in quite a few classes, he added.
“The balance and the robustness of the portfolio is much improved and that should run through the next couple of years.”
Sullivan suggests that it is feasible that if insurers create better balanced books, producing more premium, they may buy less reinsurance, especially now it is more expensive.
“If they feel more comfortable about their gross portfolio, maybe they need to manage their net loss. That will be an interesting discussion,” he said.
However, he added, from a property perspective there hasn’t been much new capital coming in. Reinsurance is constrained, retro particularly, and that will be a driver on prices.
“Discussions will be interesting and those that potentially don’t have to buy may be in a slightly better position, or not buy as much, if they have more control on the gross book,” he concluded.
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