Overall, current rate increases are not sustainable and the reinsurance market needs to correct itself on a global basis, says Steve Arora, Chief Executive Officer (CEO) of AXIS Re.
Speaking with Reinsurance News at the annual meeting of the reinsurance industry in Monte Carlo, Arora, CEO of the reinsurance arm of Bermuda-based specialty insurer and global reinsurer, AXIS Capital Holdings, called for the market to continue to correct itself on a global basis.
“I am encouraged with the signals that we see and the movements, particularly in the primary market that have continued to express themselves over the last year or two.
“But, I don’t think it’s enough and I think that reinsurance rates have to move as well. And, so, I expect this to be a continuous process,” said Arora.
Rates failed to improve either meaningfully or sustainably following the cat events of 2017, and despite more dramatic increases in 2019 after the events of 2018, rate movements were described by some in the sector as disappointing.
Both loss-affected lines and underperforming business experienced the most meaningful rate response through 2019, but outside of loss activity and the resulting impact on supply and demand dynamics, Reinsurance News was eager to hear Arora’s thoughts on catalysts for rate improvements.
“It depends, one size doesn’t fit all in the marketplace and I think globally, the trend has to be towards strengthening rates and strengthening terms and conditions.
“One thing I would say is reinsurance is global in nature and to be successful you have to manage a global portfolio, and therefore the capital pool is global, and therefore the cat pool is global. And, what we’ve seen is that the global reinsurance market has suffered a profitability issue on a global basis, and therefore the corrections need to be global.
“So, against that backdrop I don’t think we can really distinguish that certain markets should improve and other ones should not. Obviously, the order of magnitude will vary but as a general rule, I expect a global correction in those markets,” said Arora.