Juan Andrade, Everest Group Chief Executive Officer, suggests the reinsurance industry serves as a “bright light” in terms of what’s happening in capital markets right now, as the firm remains “bullish” on the industry’s trajectory for this year and beyond.
Andrade’s comments stem from an interview with Bloomberg, in which he discussed a range of topics, including the recent pricing corrections, which he said are really down to a supply and demand imbalance.
“The bottom line is, with all the storms and all the activity that we’ve seen since 2017, reinsurance companies have deployed less capital into the market. So that’s constrained supply,” Andrade explained.
He continued, “The other thing that’s happened on the supply side is, a lot of third party allocators, pension funds, sovereign wealth funds that used to put money into our sector, have also pulled out.
“That’s created a supply crunch, if you will, in the industry. But at the same time, because of inflation, climate change, and all of these other things, there’s more demand.
“So, there’s a gap of roughly $100 billion between supply and demand. And that’s what’s created the price correction that started at the beginning of this year in a pretty significant way.”
Discussing the impact of climate change, alongside insurers pulling out of Florida, Andrade noted that Everest is affected by these events in several different ways.
“We try to embed the latest science into our models to be able to do better predictions on where storms are going to develop, where they’re going to hit the coastlines, etc, etc,” He said.
Andrade continued, “But the other thing that you’re seeing right now, and you’ve seen the headlines from companies moving out of Florida and moving out of California, there’s also public policy issues that we have to address.
“I think the governor of Florida and the legislature did a nice job with the reforms in Florida because one of their significant issues was not only climate change and the storms that come out of that, but it’s also fraud and abuse in the system. And so, the governor took strong actions on that.
“California is a different story. At this point, you have a lot of companies leaving the state because the market is not functioning as well as it should be. And at the end of the day, we all have shareholders or stakeholders, and we’re for profit business.”
Finally, when asked how the reinsurance industry is forecasting where the wider economy is heading, Andrade said, “I think if you look at our industry, we’re sort of a bright light in what’s happening in capital markets right now.
“Everest just posted in the second quarter, a 25% annualized total shareholder return, and a 22%+ ROE. That tells you what we’re seeing in the opportunities that are out there. We’re pretty bullish about where the industry is going not only this year, but well into 2024 as well.”
