Underwriters at insurance and reinsurance firm Hiscox have been told by senior management that they must push for price rises, following recent major catastrophe losses, even if it is at the expense of top line.
Hiscox has been among the most bullish in pushing for price increases across insurance and reinsurance lines and the management is determined to get them, even if it means relinquishing some market share.
Analysts from RBC Capital Markets met with Hiscox CEO Bronek Masojada and CFO Aki Hussain recently and were told that the re/insurer anticipates price increases across much of the market that could last for as long as two years.
Hiscox’s management would not be drawn on just how much prices would rise, although the analysts said they sensed the firm is looking for double-digit rate rises.
As evidence they looked to Hiscox’s 2018 business plan for its Lloyd’s of London syndicate, which targets a 39% increase in capacity, driven by 12.5% rate rises and around a third of growth driven by new volume.
However, despite the expectation that there will be new volume as well as rate rises, Hiscox is not going to accept flat rates and would rather decline to underwrite business it seems.
The Hiscox senior management have told their underwriters to push for price increases and not to be concerned if the lose some top line as a result of this.
The analysts said that the message from management is clear, do not underwrite more business at lower rates.
Hiscox also believes that the recent catastrophe losses will drive a two year uptick in pricing.
With premiums from any rate increases not being fully earned in until 2019 anyway, the firm feels that two years of price increases is reasonable. However, should there be any additional losses, or if estimates worsen considerably, there could be even higher rate increases.
Hiscox’s executives reiterated their opinion that alternative capital will not be able to dampen these price increases, as they feel so much is trapped as collateral that the “wall of capital” will not be able to enter the sector fast enough to replace this by the January renewals.
As a result it seems Hiscox feels it is well-positioned to capitalise on rate increases and has urged its underwriters to stick to this, even if it means shedding some business at the upcoming renewals.
