Richard Whitt, Co-Chief Executive Officer (CEO) and Director of Markel Corporation, has said that property reinsurance rates were “inexplicably flat” at the recent January renewals.
Speaking during a company earnings call, Whitt noted that reinsurance rates were disappointing at the 1/1 renewals despite two consecutive years of heavy catastrophe losses across the market.
Nevertheless, the CEO remains optimistic about the outlook for 2019, with rate increases expected across the Japanese and Florida renewals in April and June/July, respectively.
Additionally, Markel experienced modest improvements in most primary insurance pricing during 2018, Whitt said, which accounts for 80% of the company’s risk-bearing premiums.
“We continue to push for rate increases where needed and shed reinsurance business at January 1 that did not meet our profitability requirement,” Whitt explained, adding that Markel would reduce its writings accordingly if rate increases at the upcoming renewals don’t materialise.
“If 2017, 2018 level of catastrophe activity were to continue, nobody’s business model works that writes property, just period, end of statement,” he continued. “Everything’s going to have to change if that level of activity continues.”
Markel is already writing less property business than it did at the beginning of 2017 due to concerns about elevated catastrophe risk and climate change, and is expecting to withdraw further in 2019 unless pricing improves significantly.
“We and everybody else will continue to back away from property risk unless the risk-reward equation gets back into an appropriate balance,” Whitt said. “So we’re not going to knee-jerk. We’re going to adjust, as we always do, sort of gradually, but we’re not going to knowingly continue to take losses on a product line.”
During the call, the CEO also acknowledged that Markel was expecting significant volatility in gross premium volume in its reinsurance segment due to “individually significant deals” and the timing of renewals on multiyear contracts.
Jed Rhoads, President and Chief Underwriting Officer at Markel, added that the company had grown its transactional liability business somewhat and was hoping for price increases of up to 10% in Japan and around the mid-teens in Florida.