Ariel Re CEO Ryan Mather has asserted that the reinsurance industry needs to work to rebuild confidence in the sector, following a period of challenging conditions and inadequate returns.
Speaking in an interview with Reinsurance News, Mather discussed the thinking behind Ariel Re’s “front foot” approach to catastrophe risk and the Florida market in particular, as the market enters another active hurricane season and deals with a troubled renewal period.
“The reinsurance market isn’t yet in a place where you can just turn up and win or even meet your cost of capital, as evidenced by some of the Q1 results,” he said, noting losses even among the largest European reinsurers.
“In order to win at this, you’ve got to do something a little bit different. You’ve got to be doing something special,” Mather added. “So that’s what we’re attempting to do.”
The most notable difference in Ariel Re’s approach is the way it’s looking to grow its appetite for catastrophe risk at a time when much of the market is withdrawing, and taking up Florida risk even as most firms are seeking to avoid the state’s volatile environment.
“We’ve engaged with just about all of our clients. And they’re very nervous because we’re one of the few companies that is embracing Florida risk,” Mather said. “It’s still challenging,” he added, but maintained that Ariel Re’s models are capable of capturing the risks inherent in this market.
He also assured that the company is confident in the risk management experience of its Board, and specifically its “deep understanding” of catastrophe risk, which has enabled it to take a more assertive attitude to this kind of business.
“That’s why we’ve been a little bit more on the front foot when it comes to the catastrophe market, whereas a lot of public companies seem to be withdrawing at the moment, which obviously creates opportunities for us,” Mather told Reinsurance News.
However, the CEO did acknowledge that there are still major challenges for the market, even following recent Florida legislation that aims to alleviate rising insurance costs, increase insurance claim transparency, and crack down on frivolous lawsuits that have driven up prices in recent years.
Speaking to the wider catastrophe market, Mather highlighted access to capital as one of the most serious issues.
“Capital came in very freely over the past five years or so,” he noted. “But it’s been put off by the results of the past five years, and in fact even in Q1. When we’re talking to capital providers, whether existing or new, they want to know about climate change, inflation, and about the investment climate. So all those things I would see as challenges for us that we need to overcome.”
But Mather also stressed that it’s essential for insurers and reinsurers to meet these challenges and work to improve their returns and provision of coverage in order to “rebuild the confidence that people had before.”
“That involves delivering on what we say we’re going to deliver on, and producing the correct returns,” he explained. “And that’s partly driven by underwriting profit, but also expenses need to be addressed.”
On Ariel Re’s performance in the early months of 2022, Mather concluded that the company had made a “good start.”
“We are ahead on premium income,” he remarked. “And that’s driven partly by production and partly by rate being above plan. But it’s still very early in the year. Losses have also been slightly above plan. We have seen the biggest loss in recent history in Australia, as well as obviously in Ukraine, which is much less well developed and much less well known.”
“As far as areas that we are focusing on, we have five lines of business only; property cat, US professional lines, marine and energy, clean energy, and cyber. And all those lines currently give us rate tailwind. So we feel like we can grow in them pretty confidently.”