NEWS
Retro is ‘largely loss-free’ so far
Writers of retro have had a good year so far, but wind season is not over yet: Lockton Re.
The retrocession market is largely loss-free at the moment, the beneficiaries of increases in retentions introduced in the last renewal. As such, that part of the market may also look more settled this year.
This is the view of Matthew Foreman, head of non-marine retrocession and property specialty at Lockton Re, commenting in a joint interview with Freya Foxall, non-marine retrocession and property specialty, also at Lockton Re.
“While there have been a fair amount of nat cat losses this year, and a lot of those are sitting with insurance companies, only a modest amount is with reinsurers. Equally, I would argue that the retro market is probably largely loss-free right now.”
He said that most retro writers, both traditional and ILS, have had a pretty good year so far. But he added a major caveat: the ongoing hurricane season. “We’re not anywhere near half-time and there’s plenty of active storms in the water at the moment.”
Referencing category 3 Hurricane Idalia, which hit the big bend of Florida, he said that it could have been far more catastrophic—but represented a reminder of what is possible.
“There’s plenty of active storms in the water at the moment.”
Matthew Foreman, Lockton Re
“It was a good reminder for the market as to the impact it could have, albeit it won’t impact the retro market.
“The lesson from this time last year was that we’ve still got a long way to go before the wind season closes out.”
Last year, the retrocession market experienced dislocation and constraints from a capacity perspective, he said. From a timing perspective, Hurricane Ian represented the fifth year in a row of active losses in the cat market.
Add in additional macroeconomic and geopolitical challenges and complexities in 2022, and last year’s renewal was “very fragile”, he commented.
However, the market, including retro, stabilised slightly at mid-year, both at 1/4 and 1/6, he said, although the majority of the retro renewal limit gets done at 1/1. “The dislocation and complexity and constraints really happened at 1/1.”
Returning to this year’s 1/1 discussions in Monte Carlo, Foreman said that the consistent themes he is picking up from meetings is that neither clients nor markets are expecting significant reductions or increases from both price and structure perspectives.
“The word that keeps coming up is that there will be a reset rather than a reduction.”
Images, from top: Shutterstock / Paul Harrison