A “flat but functional” pricing environment for property catastrophe is likely to become the “new norm” for reinsurers following a fairly subdued year for renewals despite high catastrophe losses in 2017, according to James Kent, Global Chief Executive Officer (CEO) of Willis Re.
Speaking at a press briefing during the first morning of the Rendezvous event in Monte Carlo, Kent said that “despite high loss activity in 2011 and high cat loss activity in 2017 … we are seeing a much steadier pricing graph.”
“That is having a transformative effect on property cat pricing,” Kent explained, “and we see a much smoother pricing line through both the harder and softer pricing dynamics. So we see less highs but we see less lows as well, and I think that’s a point that sometimes gets lost.”
Kent attributed ongoing soft market conditions to drivers such as earnings recovering, stable capital, and abundant capacity, and said that current market pricing is now generally “dictated by account loss results.”
However, he added that, for what is considered to be a soft market, Willis Re continues to view conditions as very functional for reinsurers and brokers.
“Regulation has definitely had an influence in terms of providing oversight and discipline of the market,” Kent said, “and we do say that for a soft market, it’s functional where pricing is being corrected on accounts, on the history of that account, and on the loss performance of that account.”
Andrew Newman, Global Head of Casualty and CEO Alternative Strategies at Willis Re, explained that the reinsurance industry has been transformed by a fundamental shift in the sources of risk and origination of capital.
“We think we’re going to experience a renaissance,” Newman said, “as there is a hunger to understand how to navigate this market and how to get access to these new sources of capital, and to originate risk in new and exciting ways that tackle some fundamental problems that the reinsurance industry faces.”
He explained that “technology and securitisation of risk are the great enablers for incredible change,” and claimed that companies with the best use of technology, access to the lowest average cost of capital, and closest proximity to clients are best placed to win in the current market.
