Robert Berkley, the President and Chief Executive Officer (CEO) of W. R. Berkley Corporation, has underlined that while the property segment remains very challenging, in other areas of the reinsurance market, “it’s not completely a buyers market.”
The firm recently announced its second-quarter 2018 results, reporting net income of $180 million and a combined ratio of 94.9%. During the period the firm’s net insurance premiums written increased by 5.2%, although this was offset by a chosen reduction in the reinsurance segment in light of the competitive landscape.
Following the catastrophe events of 2017 and the persistent and growing influence of alternative reinsurance capital on the property sector, especially in the U.S., this area of the re/insurance market remains extremely competitive and pressured, underlined by the disappointing rate hikes witnessed throughout 2018.
Commenting on the reinsurance sector during the company’s Q2 earnings call, Berkley said: “On the domestic front, property remains very challenging. Having said that, we continue to be cautiously optimistic that the casualty and professional markets are showing early modest signs of improvement. For certain accounts that have had severe loss activity, or new accounts, there seems to be a shift in the pricing leverage, where it’s not completely a buyers market.”
While an improvement on the softened state of reinsurance market pricing prior to Q3 2017 events, industry commentary has suggested that the competitive property segment remains a buyers market, with primary players able to better dictate terms at renewals as supply continues to outweigh demand.
But as noted by Berkley, this isn’t necessarily the case across the reinsurance market spectrum, and some other lines of business might well prove to be more attractive in the current market environment.
The firm’s Q2 results announcement reveals that net reinsurance premiums written declined to $110.6 million, with the steepest reduction occurring in the property segment, which fell from $39.7 million in Q2 2017 to $30.2 million in 2018.
“On the international or the non-U.S. front again, property is challenging but casualty and professional actually seems to be gaining some meaningful momentum.
“But on the topic of property, it will be interesting to see some of the commentary that we see, that is coming out of London, whether that is just proved to be chatter and noise, or whether that will convert into greater discipline and action on behavior.
“I was surprised at the 7/1’s (renewals), but I was even more surprised back at 1/1. I thought after what you saw happen in the third-quarter and what you saw happen in the fourth-quarter, I didn’t think it was possible that this cat reinsurance market was going to be flat (sort of),” said Berkley.
The President and CEO continued to explain that when it comes to property catastrophe business, there is a huge amount of capacity from both traditional and alternative sources, which is mitigating the market’s ability to turn as it has done in other post-event years.
“I think it’s one of the reasons why some of the lines of business that are not, that are places that alternative capital did not participate in, are showing signs that they are poised for more of a historical turn,” he added.
Domestically, Berkley explained that the firm is “cautiously optimistic” about the reinsurance market, but stressed that it’s “increasingly bullish” about reinsurance business outside of the U.S.
In the coming days and weeks more and more companies will be announcing their second-quarter results, and it will be interesting to see if market pressures have led to others to pull-back on the competitive reinsurance segment, and looked to increase participation elsewhere in hope of greater profits.
