Kevin O’Donnell, President and CEO of Bermudian reinsurer RenaissanceRe, has said he expects returns for his company to be “substantially higher” in 2023 if the coming year proves to be either a normal year or a repeat of 2022.
RenRe executives commented on current market conditions and the company’s performance during a Q4 earnings call this week.
The reinsurer reported a rise in net income and underwriting income for the quarter, although the impact of weather-related large losses pushed it to report a net loss of $1.1 billion for the full year.
However, looking ahead, O’Donnell maintained that RenRe’s performance this year should improve significantly due to market-wide rate increases, premium growth, better profitability and higher investment returns, among other factors.
“If we looked at hurricane Ian occurring in the third quarter of this year, I would expect our loss would be significantly lower for a couple of reasons,” O’Donnell explained during the earnings call.
“One, primary companies will need to retain more risk and secondly, we will have more rate, so more reinstatement premium coming in, should there be a loss. So, I think from that perspective, we would have a smaller loss,” he continued.
“If we were to look at winter storm Elliott, between the increased retentions, tighter terms and conditions and higher rates, I would expect that loss to be almost fully-retained within the primary market and not be transferred to the reinsurance market, which is different than what happened last year.”
Asked about the health of the property cat market now compared to previous times of turbulence such as post-Katrina, O’Donnell noted that there were key difference that made certain areas of business “extremely attractive” this time around.
“I think of this 1/1 as being less similar to 2006 and more similar to what happened in 2002, I guess, because it’s broader geographically. There are far more attractive lines and far more hardening lines in the market. And so, I don’t know how to answer your question with regard to comparing it to 06. So, when I think about what we’ve built in our ability to leverage in the market, it’s stronger now than it was in 02,” O’Donnell concluded.
“The fundamentals of the market are a little different, but the ability for us to harvest profit from the casualty portfolio, I think is increasing. We’ve got a much bigger Capital Partners business which continues to contribute, investment returns look stronger, and then the property portfolio at the reset level, is at extremely attractive levels.”