Reinsurer Transatlantic Holdings (TransRe), part of the Alleghany Corporation, did not find the rate rises at the January renewals sufficient for it to greatly increase its risk appetite and expand its underwriting book.
TransRe saw pricing in both the property and casualty reinsurance markets as improved in the fourth-quarter of 2017, but it wasn’t enough for the firm to consider deploying much more of its capital.
“Given the significant catastrophe losses sustained by the industry, these increases were slightly below initial expectations for the property business,” TransRe explained, but adding that rate increases, “Exceeded expectations for the casualty lines of business.”
However, the rate improvements were not seen as significant enough for a change of strategy by TransRe. This differs to a number of other major reinsurers, which have expanded their books at the 1/1 renewals in order to capitalise on higher rates, especially in property catastrophe lines.
TransRe said that the price rises it saw, “Did not merit an increase in TransRe’s risk appetite and its premium writings remained relatively unchanged both in the fourth quarter and at January 1.”
In fact, TransRe reduced its premiums written in the fourth-quarter of 2017, citing, “cancellations, non-renewals and reduced participations in certain treaties, the impact of rate pressures, and increased retentions by cedants.”
Additionally, a large quota share treaty that TransRe had been underwriting saw the premiums drop to $780.9 million in 2017, compared to $854.3 million in 2016.
TransRe’s combined ratio for full-year 2017 was 106.9%, compared with 93.3% for full-year 2016. But in Q4 the company experienced some reserve improvements, leaving it with a better fourth-quarter combined ratio of 90.2%, compared with 91.8% for Q4 2016.
The combined ratio for the full-year was, of course, hurt by the hurricanes, earthquakes and wildfires of 2017, as well as the Ogden Rate change.
Looking ahead, TransRe said that should reinsurance rates continue to improve it may be tempted into deploying more capital into underwriting, saying, “Should the pricing environment improve further, TransRe has significant capital available to deploy and meaningful third party capital under management.”
But in the meantime TransRe said that it will continue to be selective in underwriting catastrophe exposed property business, making use of retrocession to manage its net exposures.
However, on the casualty side where the firm saw greater improvement, it believes that its record as a casualty reinsurer positions it well for further expansion into casualty lines of business.
