Reinsurers should not be looking to alter their strategy in response to changing market conditions, but should instead be focusing on consistency and execution, according to Jon Colello, CEO for P&C Americas and President of PartnerRe.
Speaking in an interview with Reinsurance News, Colello acknowledged that both insurers and reinsurers were facing a number of evolving challenges in the US market, particularly on the loss side.
However, he maintained that PartnerRe has responded to these challenges by redoubling efforts to focus on implementing the goals of its existing strategy.
Outlining the company’s priorities going into 2020, Colello said: “The most important thing to emphasise is that it’s really an execution strategy for us; by that I mean sourcing risk, providing top level service to our brokers and clients and pricing for the appropriate return.”
“It’s about executing that through a changing marketplace with a lot of things happening on the loss exposure side,” he explained. “And that’s the challenge for any business in this environment.”
“If your strategy is well-reasoned, it’s about executing it in a changing environment. A changing environment shouldn’t necessarily change your strategy, it should sharpen your execution.”
Colello told Reinsurance News that PartnerRe’s primary concern going into the January renewals is helping its customers to navigate uncertainty and respond with appropriate reinsurance.
“For the first time in a long time more of our customers are looking to us for insights with respect to loss cost inflation,” he said, noting that losses were rising across a range of lines, including commercial auto, general liability, and umbrella and excess.
“And that’s where we can help,” Colello added, “that’s where we can add value outside of a strong capital base and an efficient reinsurance transaction.”
Looking at the environment ahead of the 1/1 renewals, PartnerRe is confident that the US P&C market will broadly benefit from improved pricing, as the response to loss cost inflation on the primary side is likely to translate into reinsurance rate increases.
For catastrophe lines specifically, Colello also sees a further hardening of nationwide accounts, following three highly active years for the Atlantic hurricane season, as well as wildfire losses and storms in Japan.
Loss creep on prior year catastrophes in the US should also continue to have some impact on market pricing in 2020, he said.
“It’s very early to tell what the ultimate economic insured impact of the loss activity that we’ve seen in 2019 will be,” Colello told Reinsurance News. “I think that the ultimate clearing price on cat exposed lines of business will be a function of supply and demand which overrides everything.”
“But I do think that if you’re looking to have a more sustainable price based on the risk and volatility that reinsurers are taking on their balance sheets, then there’s room for further rate increases.”
In terms of where PartnerRe is identifying opportunities for growth in the US market, Colello said the company continues to see interesting developments around cyber risk, public to private risk, and flood.
“I wouldn’t say that they are particularly attractive, but they’re dynamic,” he remarked. “And when markets are moving and changing, there’s opportunity both for our customers and us to capitalise on that.”
“But it’s good news that we’re getting underlying rate in a lot of lines of business. There is a need for it, and we need to help our customers be ready for when an opportunity presents itself.”