Speaking as part of a panel discussion at the S&P roundtable during the meeting of the reinsurance industry in Monte-Carlo, industry experts and executives said that it will take a black swan event to turn the marketplace.
Despite losses of a reported $140 billion in 2017, expected to be one of the costliest loss years on record for the global insurance and reinsurance industry, rate improvements were muted (and appear to be fading already in 2018) and focused on loss-impacted lines.
The ease at which alternative capital reloaded and actually expanded in time for the January renewals served to dampen rate increases, and has led many in the industry to note a new reinsurance market normal, underlined by a flatter market cycle.
In light of the market reaction to 2017 events, panellists were questioned on what it might take to really turn the industry, and meaningfully and sustainably improve pricing.
Ron Diaz, Executive Vice President (EVP), International Department Head at Everest Re, said: “I think that the reserving situation will force people to be a little more technically sound in their underwriting.
“But, the idea that you’re going to get more pricing or higher pricing going forward, is not exactly something we see at the moment. It would have to be a black swan event that no one expected, that’s not modelled, something that is much larger than anyone had of ever imagined had happened.”
Jurgen Graber, Member of the Executive Board – Property & Casualty Coordination and Global Reinsurance, at reinsurer Hannover Re, added: “It needs to take more away than the earnings of the industry, that is what I dare to say. From $60 billion onwards it’s becoming more meaningful. The key is, if it is a greyish or black swan, the figures can be lower because that is when the industry reacts with a model adjustment.”
Interestingly, Dr. Christoph Lamby, Chief Executive Officer (CEO) of Germany-based R+V Re, suggested that perhaps the focus is too much on the technical side.
“Let’s look also at the asset side and the capital markets seem to be a bit more shaky. So, a combination of events, either on the technical side and on the asset side might bring us into a very different environment,” said Dr. Lamby.
