Bermudian re/insurer Arch Capital Group expects worsening liability loss trends to cause the industry significant pain but is confident in its own reserve position.
Arch’s Chief Executive Officer Marc Grandisson and Chief Financial Officer François Morin say the firm’s position reflects its longstanding conservative reserving philosophy and recent years’ strong mortgage insurance prospects, both of which materially reduced the temptation to underwrite poorly-priced P&C business.
Keefe, Bruyette & Woods analysts believe that Arch’s exposure to worsening liability loss trends is largely limited to likely-shrinking reserve ratios.
KBW adds that Arch has long focused on cycle management as the “easy-to-say, hard-to-do” key to driving long-term P&C outperformance.
This, analysts say, explains why until the relatively recent P&C pricing uptick it emphasised Mortgage Insurance over P&C (re)insurance.
Grandisson also cited several large insurers’ retrenchment efforts – along with Lloyd’s management’s imposition of discipline – as significant contributors to improving conditions, which should support Arch’s increasing focus on P&C.
