Bermuda-based reinsurer Everest Re has noted the combination of disruptive forces as the market approached January 1st, 2018, resulting in a complex renewal season for the reinsurance industry, underlined by the continued and growing influence of alternative capital and the market impact of 2017 catastrophe events.
Speaking during the reinsurer’s recent earnings release, John Doucette, President and Chief Executive Officer (CEO) of Everest Re’s reinsurance operation, highlighted a “complex” renewals season as a result of numerous market forces.
According to Doucette, these market forces include large losses, a new market sensitivity to risk, substantial volumes of trapped, and the reloading of some alternative capital, the reevaluation of large clients’ ceded reinsurance strategies, and governments/economic risk holders de-risking, essentially bringing new risks to the reinsurance industry.
After years of falling rates and increasing competition from alternative, or third-party reinsurance capital providers, huge catastrophe losses in the second-half of 2017 changed the landscape for industry participants as the key January 1st, 2018 renewals season approached, with many hoping for substantial rate increases.
“1/1 was complex as the market tried to decide what it was and what it wanted to be; a purely capital markets transactional marketplace with staggering velocity of capital formation, or a market of longstanding reinsurance relationships between buyers and sellers that understand each other.
“In the end, it was somewhere in between,” said Doucette.
He continued to add that while the market response was less pronounced than witnessed in truly hard markets of the past, many customers realised that after persistent rate declines and sizeable losses, there was a need for rate increases.
Ultimately, the reloading of alternative reinsurance capital, coupled with the persistent competition from traditional players, “had a muting impact on January 1st renewals,” said Doucette, which supports the notion that third-party capital has now become an “enduring reality.”
Overall, Everest Re feels the January 1st, 2018 renewals season was successful, with premium up by several hundred million dollars at 1/1 2018 when compared with the previous year.
“And our combined ratios are lower and our expected profits are higher in 2018,” said Doucette.
