Michelle To, Head of Business Intelligence at international insurance broker Howden, has asserted that the current pricing environment presents “generational opportunities” for those reinsurers that are able to deploy capital efficiently.
Speaking as part of a Q3 insurance and earnings update, To concluded that pricing dynamics are “creating a healthier forward operating environment for carriers who can take advantage.”
But this may prove to be a major caveat, as Howden data for the Q3 period shows that capital has been significantly impaired for many re/insurers, and in some cases trapped.
The key theme for the quarter was of course catastrophe losses, specifically from Hurricane Ian, which threatens to make 2022 the second largest loss year of the last five years surpassing the five year average.
“We are now in a world in which $100 billion of insured losses is considered normal,” To noted, with co-presenter and Head of Analytics David Flandro adding that Q3 represented a period of “acute and significant change,” that will have “ramifications surely for many years to come.”
However, Howden data also showed many positives in the outlook for reinsurers, in particular due to the favourable pricing environment, but also due to recent favourable reserving experiences.
“There are significant variations but generally tailwinds include higher pricing, high discount rates and conservative percentages of IBNR in previous accident years,” To explained. “The active rebalancing of underwriting portfolios continued in the quarter with carriers entering and exiting lines and classes of business. Although again, there is significant variation.”
“If there is a trend it is away from property exposure at the margin in favour of specialty lines. And most carriers are now growing across their chosen lines of business. This is driven partly by price, but also by exposure to new areas of opportunity, including primary business,” she continued.
And Howden data also shows that reinsurance sector returns are expected to rise significantly in the next few years, with the sector set to grow in spite of – or perhaps even because of – the deteriorating global economic picture.
