Underwhelming market corrections following the record-breaking 2017 losses is proof that insurers and reinsurers must have a clearly defined strategy when undertaking risks, according to Canopius’ Global Head of Marine Treaty, Andy Gladwin.
In the event of a U.S. catastrophe, Gladwin said there can be an accumulation with property risks both in earthquake and hurricane-exposed zones. Adding that it is vital for insurers to charge more on the original business and make informed decisions in such areas.
“Our business is driven by uncertainty. We know that there will be a collision, a blow-out or a natural catastrophe but we don’t know exactly when nor how much it may cost,” said Gladwin.
“A very considered approach to costing risks is required. It has been noticeable that subsequent to the Irma and Maria losses, there has been a significant withdrawal in the direct market space for writing MGA type business for yachts and yachts in general.
“This should prove an indicator as to the gargantuan size of the losses this class can face when written on the wrong terms and conditions, heavily exposed in the wrong areas and at the wrong price,” he added.
Gladwin added that the “catastrophe bet” underwriting entities’ had depended on finally lost in 2017, when the $100 billion – $140 billion of losses from Irma and Maria failed to trigger a market correcting effect.
“This proved to be underwhelming, largely due to an exhaustive supply of capacity in the reinsurance sector. The reason for the hard markets of 1993, 2002 was due to a lack of capacity. In today’s market entities are far larger and able to absorb loss activity,” explained Gladwin.
