Reinsurance News

There’s a lot to take away from the outcome of Jan 1 renewals: Britten, PwC Bermuda

8th March 2023 - Author: Luke Gallin

The Bermuda insurance and reinsurance marketplace weathered the impacts of multiple heavy loss years, the global pandemic, and the more recent rise in interest rates and inflation extremely well, despite the acute and far-reaching effects, according to Matt Britten, Partner in the PwC Bermuda Insurance and Reinsurance practice, and Risk Assurance practice leader.

matt-britten-pwc-bermuda-mar2022Britten, who has a deep insight into the Bermuda market and works closely with clients across reinsurance and insurance-linked securities (ILS), spoke with Artemis recently as part of the publication’s series of live interviews.

Given his focus on audit and risk control oversight of companies, it’s an interesting time to hear his thoughts on how the Bermuda market is responding to global pressures.

“When you think about just how challenging the environment has been for the Bermuda market, the multiple years of cat losses exceeding $100 billion, far-reaching impacts of the global pandemic, and more recently, rampant inflation and the rapid rise in interest rates, I think you have to say that the Bermuda market has weathered extremely well,” said Britten.

“It’s shown fantastic resilience, it continues to innovate, and it remains a market that attracts new capital and new entrants,” he added.

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Britten went on to explain that despite this resilience, it’s important to recognise that as a result of the challenging landscape, many reinsurers have failed to meet their cost of capital for the last five years or so as returns have been lacklustre.

Now, though, the reinsurance market is harder, with some significant rate increases in both catastrophe-exposed and other lines of business, which suggests improved underwriting returns for carriers.

“I definitely feel that 1/1 this year was a turning point that should start to allow reinsurers to have a platform from which they can start generating those returns that will help them meet their cost of capital,” said Britten.

In terms of how Bermuda has thus far managed the global macroeconomic and financial market volatility, Britten noted that it’s been both acute and very wide-reaching.

“And I think, again, you can take a lot away from the outcome of this 1/1 renewal season, actually, when you think about it. If you were to ask the question, why, after a number of successive years of plus $100 billion cat losses, was it that it was this particular 1/1 where we saw such a dramatic shift? I think a large part of that answer would have to be that this renewal season came off the back of the significant interest rate rises and rampant inflation, right,” said Britten.

“Obviously, the impact of the interest rate rises has been a significant decline in the market’s overall capital position as reinsurers have suffered unrealized losses in their investment portfolios. I should probably point out that as we evaluate that decline, we should be aware that those losses are not considered credit related, and we’re not getting the benefit on the other side of the balance sheet where reserves are not discounted. But regardless of those factors, I think we’ve got to recognise that puts us at the very lower end of the capital position that the Bermuda marketplace has been in for the last decade,” he added.

You can watch the full video interview with PwC Bermuda’s Matt Britten below.

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