In an interview with our sister publication as part of the Artemis Live series of video interviews, Arthur Wightman, territory leader for PwC Bermuda, discussed what he describes as one of the hardest reinsurance markets.
“The reinsurance industry across the main domains that operate here in Bermuda are doing well,” said Wightman, who also leads markets and the insurance industry sector for the Caribbean region.
The interview, now available to view on demand, covered the hardening reinsurance market in Bermuda against the backdrop of climate change.
“The market is one of the hardest, particularly for sort of climate related reinsurance risks, that we’ve seen for a very long time. Many would say it’s a necessary hard market, many would say that the pricing is now finally getting to levels that are more appropriate for the risks that are being underwritten,” said Wightman.
For the past six years, insurers, reinsurers and insurance-linked securities (ILS) markets have had to navigate above-average levels of catastrophe losses, with annual insured losses in 2022 exceeding the $100 billion by some way.
While last year featured the Hurricane Ian, the second most costly insured loss event in history, losses in previous years have been either driven or exacerbated by secondary perils, such as convective storms, floods, and wildfires.
In response, reinsurers once again pushed for higher pricing at the January 1st, 2023, reinsurance renewals, with notable and significant increases seen in catastrophe-exposed regions, but also in other classes of business, highlighting the need for more rate across the board.
“CEOs are very determined at the moment to ensure that as they’re thinking about capital returns, return on equity, they are getting appropriate levels of returns for the shareholders, relative to what we might have seen over the last decade or so,” continued Wightman. “So, a lot a lot of that is featured in the underwriting renewals that have taken place.”
According to Wightman, what’s important is that pricing holds over the long-term to ensure that those returns are realised for the benefit of shareholders.
“And clearly, what we’ve seen a lot of in the last decade, particularly with the prominence of ILS, is that dampening down of the underwriting peaks and troughs, but particularly the peaks. And with a lot of capital coming into the market, we’ve seen some of that depression, which, again, has done nothing for the benefit of those returns for shareholders.
“So, it’s a strong market at the moment, but it’s a market that everybody’s focused on maintaining over the longer term,” said Wightman.
You can watch the full video interview with PwC Bermuda’s Arthur Wightman below.