JMP has said it is optimistic about the current state of the market and with the potential for hard conditions to persist.
This was revealed in a new note from the company, authored by Matthew J. Carletti and Karol Chmel. The authors wrote about recently going to Bermuda to meet with insurers, reinsurers, and brokers. Their conclusions, they wrote, were that there was a lot of ‘confidence and optimism concerning overall market conditions’.
They wrote: “Those we met with last week universally expressed confidence and optimism in their outlook for hard market conditions, much more so than was the case just a quarter or two ago. The potential pricing deceleration that was seen in late 2021 has seemingly evaporated and confidence surrounding the market’s ability to continue to drive pricing increases for an elongated period has been emboldened by the ongoing loss pressures/events in the market.”
They added: “There was more optimism surrounding casualty lines than property, but those we met with seemingly had a strong resolve to continue to reduce property exposures if pricing does not achieve needed increases (notably more so than in the past – it feels like real resolve has formed).”
Despite this, the authors said that the upcoming 1 June Florida renewal is set to be one of the toughest in recent memory.
They said: “It is no secret that the Florida homeowners’ market is in a very difficult spot. A handful of companies have already not made it, and just last week rating agency Demotech suggested that up to 20 companies could be downgraded (although this now seems to be 10-15, with one additional downgrade taking place and several having their ratings reaffirmed).”
Another issue is inflation. The common consensus, writes the authors, has been that the current elevated inflation will be transitory. However, that mindset is now changing. And the reinsurance industry is taking the issue seriously.
(Meanwhile, inflation has remained a hot topic on other pages of Reinsurance News).
Carletti and Chmiel wrote: “While the loudest inflationary item in the market today – auto loss costs – was not much of a concern on the island (due to a lack of primary personal lines carriers and little-to-no reinsurance exposure), the potential for loss cost inflation to creep into a variety of longer-tail casualty lines did garner focus. In particular, there is a lot of focus on accident years 2014-2017 (bottom of the cycle years that are green enough to still have meaningful open exposure). Recent struggles by the likes of James River (JRVR, MO, $36 PT) and Argo (ARGO, MP) in areas such as construction defect were eyed with caution as potentially indicative of more to come (for the industry, not those specific companies).”
