During insurer and reinsurer Aspen’s first-quarter 2017 earnings release call, Group Chief Executive Officer (CEO), Chris O’Kane, discussed the challenging reinsurance market landscape, which continues to drive a need for discipline and efficiency.
Despite the challenging, softening reinsurance market landscape, Aspen Re, the reinsurance arm of Aspen, recorded a combined ratio of 89% in the first-quarter, and increased its gross written premiums by 9%. However, O’Kane did stress that much of the growth in its reinsurance segment came from specialty lines, which was largely driven by the firm’s recent acquisition of AgriLogic.
Absent the takeover of AgriLogic, the firm’s reinsurance segment top line would have remained relatively flat, which isn’t too surprising given that rates across the global reinsurance industry were down by 2% in Q1, says O’Kane, representing a continuation of the persistent, albeit slowed rate declines.
“While the overall pace of rate reduction continues to slow, pricing remains pressured and we continue to be extremely disciplined. Our reinsurance colleagues have been able to hold the line while writing risk that we like and managing our exposure.
“Against this background, we were selective in our growth opportunities across all of the subsegments. For example, most of the growth in our specialty reinsurance business in the first quarter came from AgriLogic,” said O’Kane.
O’Kane continued to explain that the AgriLogic takeover provides Aspen with a good long-term growth opportunity in the U.S. agriculture business, and after a positive first year with the AgriLogic team on board, Aspen continues to “believe those prospects remain bright.”
Away from the AgriLogic acquisition, O’Kane highlighted the firm’s continued use of third-party reinsurance capital via its Aspen Capital Markets unit, which helps the re/insurer reduce exposures in property catastrophe lines and manage its net exposures.
In today’s reinsurance market environment discipline and efficiency are key to profitability and even survival, as companies fight for a seemingly shrinking market share that’s awash with capital from traditional and alternative sources. But unlike market cycles of the past, O’Kane said that he no longer sees so many “fools” in the reinsurance industry, suggesting an increased maturity and sophistication of all elements of the re/insurance value chain.
“I don’t think anyone is a fool, I think people are carving out pieces of each other’s portfolio that belong more efficiently in their own balance sheets and that’s what’s going on,” said O’Kane.
