With the January reinsurance renewals just a couple of months away, there are a number of different factors that could impact property renewals. The hard market has been gaining momentum and been sent into overdrive by Hurricane Ian. Added into this mix are the macro-economic factors such as inflation, and interest rates, which have been exacerbated by the Ukraine and Russia conflict and the global energy crisis.
Reinsurance News caught up with Ariel Re London Property Underwriters Tom Orton and Giovanni Maccioni about one of the most complex renewals in living memory.
“Even before Hurricane Ian made landfall, there was already an imbalance in the amount of available capital relative to the amount of demand for property catastrophe reinsurance,” said Orton.
“That’s largely down to investor appetite. In the past five years, despite the big losses, there has not been a significant withdrawal of capacity and only a marginal increase in rates. Therefore, some investors are saying ‘enough is enough’ – they don’t want this volatility. We are now seeing a withdrawal of capacity while at the same time demand and pricing is going up.”
Maccioni added: “There is a supply and demand mismatch. It is an interesting combination because this change in the market, aligned with hardening rates, is very attractive. Hurricane Ian has amplified all these issues.
The war in Ukraine is going to have an impact on the availability and pricing of political violence covers, and pricing, terms and conditions need to keep up with changing geopolitical uncertainty across all lines of business.
“We still don’t know what impact the war in Ukraine will have on the reinsurance sector and what that means for the renewals – apart from the fact that the specialty insurance market will be facing more difficult conditions as insurers adjust their portfolios following material losses from the conflict,” Maccioni said.
Meanwhile, advancements in technology continue to make an impact on the industry. Many insurers and reinsurers are utilising machine learning and AI within their business. Both Orton and Maccioni explain how these advancements are being used to help their clients.
“We have a great insurance pricing and portfolio tool, and we closely align our analytics with our underwriting,” said Maccioni. “At this stage in the market cycle, Ariel Re will utilize the confidence and conviction in our pricing tools and risk selection techniques to deliver capacity for clients and brokers at sensible terms and conditions that match our select risk appetite.”
Orton added: “We have a small underwriting team, so we are able to react quickly. Ariel Re understands property risk – we have a discerning risk selection process, backed by risk-willing investors who understand the nuances of the reinsurance market. Our investors are not retreating from property risk, therefore, we are able to cherry pick the best risks with the backing of our investors – and the best-in-class technology.”