The President and Chief Executive Officer (CEO) of reinsurance broker Guy Carpenter, Dean Klisura, said last week that the firm has been working for some time to bring additional capital and interest into the catastrophe market for next year.
As we wrote previously, Guy Carpenter is really starting to see the property catastrophe market tighten as the January 1st, 2023, reinsurance renewals fast-approaches.
“Ian’s impact on an already distressed property market could be significant. Prior to Ian, there seemed like there was increased demand from clients to absorb inflation and recent losses in the market,” said Klisura, speaking recently during Marsh McLennan’s Q3 2022 earnings call.
2022 is set to be the third year in a row of $100 billion+ of catastrophe losses, and Klisura feels that it’s going to be potentially be more than just rate increases that U.S. exposed clients will have to navigate.
“Increased retention, changes in coverage terms, reduced capacity from individual players, and also the impact from the retrocession market, which could be significantly impacted as well,” said Klisura. “Some are discussing 25% of the retrocession capital being trapped by Ian in the market and not replenished for January 1.”
“So we’ve certainly got some stresses there,” he continued.
In the U.S., notably places like Florida, there’s expected to be a supply / demand imbalance at 1/1 as buyers seek additional protection in the wake of recent losses and inflation, while sellers of reinsurance continue to retreat from the cat space in order to lower volatility.
In this environment, it’s anticipated to be a very tough, and potentially very costly renewals for certain buyers of protection, with some likely unable to secure the desired level of protection.
“However, I would say we’re working very closely with our clients, leveraging our deep expertise in the market, to work closely with clients deliver successful incomes. And we’re investigating new capacity in the marketplace.
“We’ve been working for several months with players around the world to bring more capital, more interest into the cat market on behalf of our clients,” said Klisura.
It remains to be seen just how constrained the market is at 1/1, but it’s encouraging to hear that reinsurance broker’s such as Guy Carpenter have been working to alleviate some of the inevitable pain for clients.
