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Reinsurers will find common ground on pricing at renewals: TigerRisk’s Gulbransen

12th November 2021 - Author: Matt Sheehan

Despite significant pressure following another year of elevated catastrophe losses, reinsurers and clients will likely manage to find “common ground” on structure and pricing at the 2022 renewals, according to TigerRisk’s Wade Gulbransen.

Gulbransen, who serves as Head of North America at the re/insurance risk, capital and strategic advisor, recently spoke to Reinsurance News about the state of the market and his expectations for renewals.

Looking at property business, he noted that multiple years of high cat losses since 2017 have led to an emphasis on re-evaluating views of risk, and to get pricing and coverage to a level that creates a sustainable product over the long term.

While this trend will probably cause continued hardening on the primary side, Gulbransen anticipates that reinsurance rates will remain at roughly the same levels seen at the 6/1 and 1/1 renewals this year.

“We’ll continue to see increased pressure and less interest in lower layers or underlying aggregate programmes, which will be more challenging in the market, due to loss activity and the number of events clients have experienced in recent years,” he told Reinsurance News.

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“Market conditions will put pressure on pricing in the upper layers. Reinsurers are talking about moving up and keeping similar capacity, which will create more than adequate supply for the upper layers that stretch beyond the 1 in 15-year return period. There may be some pricing tension and increases due to increased exposures in total insurable value,” Gulbransen explained.

“When you get below the one in 15-year return period, we’ll see more pricing pressure and less capacity.  However, we do believe clients and markets will find common ground through structure change and pricing given the desire by clients to continue to buy volatility protection at lower return times.”

Part of the difference in pricing between the primary and reinsurance sides can be attributed to the economic inflationary trends that are having an impact on the insurance industry, the TigerRisk executive added.

These inflationary trends include materials and labour costs, as well as social inflation factors such as changing social attitudes and the force of public opinion that can drive insurance claims beyond what would be expected.

“As an industry, inflation has been a non-factor and rather consistent for an exceptional long period of time. Today, that is not the case,” Gulbransen remarked.

“Everyone, insurance companies and consumers, are feeling the impact of inflation on our every-day lives. As we turn to insurance, inflation has an impact on claims and on the value of the asset being insured.”

“What I’m hearing about inflation is that the peak has not made its way to the front end, but it has on the back end because it costs more to replace or repair damaged homes due to more expensive labour and materials,” he went on.

“We’ll be discussing inflation in 2022, and how it translates into exposures on the front end, and what it means for reinsurers as they assume that exposure.”

The other topic shaping renewal discussion in the lead up to January is the growing level of insured losses from secondary perils, which this year included European flooding, wildfires and Winter Storm Uri in the US.

On Uri, Gulbransen acknowledged that the size of the industry loss was clearly exceptional due to the failure of the Texas electrical grid, but he added that re/insurers need to help clients better prepare for the new reality of these kinds of secondary peril risks.

“First off, winter storm losses are not new to the market,” he asserted. “When you look back, we have had a sizable winter storm every other year.”

However, he also granted that “infrastructure in certain regions of the US is not what it should be,” and suggested that re/insurers could help to improve societal resilience to these events.

“There have been larger losses, but these are not new perils. There have always been wildfires in California. The reality is people want to live closer to the coast or in the forest, driving up concentrations and possible loss potential,” Gulbransen told Reinsurance News.

“Collectively – the insurance, reinsurance industries along with clients, homeowners and business owners – must come to terms with the fact that these risks are not going away and figure out how to reduce our exposure to them,” he continued.

“As an industry, we provide volatility protection from natural catastrophes, and we must educate our clients on how to better manage these secondary perils. In colder climates, for example, most people are familiar with how to winterize their homes. This fundamental process helps mitigate loss damage when power fails during colder temperatures. In the case of Uri, this simple step may have saved our industry millions of dollars.”

In this sense, Gulbransen urged re/insurance advisors to think “holistically” about their business, rather than focusing only on transacting deals.

“Today, solving a client’s complex problems is not a job for one person but requires a team working together in harmony, bringing their best ideas and with no concerns about who gets the credit,” he noted.

“Our integrated approach differentiates Tiger from our rivals. We have skills and experience in capital markets, strategic advisory, and analytics, for example, and we are multi-regional with our London and New York teams. There are no silos in Tiger – we work in harmony to get the best solutions for our clients.”

TigerRisk recently underwent a major leadership change, as Rob Bredahl took over the CEO role from long-serving head Rod Fox, who has since transitioned into the role of Executive Chairman.

Bredahl, who previously served as President at TigerRisk, was succeeded by Tim Ronda, who joined the firm from Aon, where he served as Global Geographic Leader of Reinsurance Solutions.

First off, many of us have worked with Tim and we are excited to have him on board,” said Gulbransen, commenting on the recent executive changes. “He fits our team culture, understands our mission and complements our vision in bringing the very best talent to our clients to help solve their problems.”

“Tim joining our team signals to the market that we now have the best leadership team in the industry,” he concluded. “We are excited to see this new chapter in Tiger’s growth and to continue to add depth to our executive team.”

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