With rates now on a trajectory towards hard market territory, Hamilton Re Chairman and interim CEO David Brown says the company is seeing opportunity across specialty insurance and reinsurance business.
Speaking in an interview with Reinsurance News, Brown said he was confident about Hamilton Re’s prospects following its takeover of Pembroke and Ironshore Europe from Liberty Mutual last year.
“This is the market we’ve been waiting for at Hamilton and, thanks to our recent acquisition, we are well positioned to thrive in it,” he said.
While the company remains selective in its growth, Brown notes that opportunities are arising in both existing and new lines of business, with the vast majority of Hamilton’s lines seeing rate increases.
“As we complete the integration of the business we acquired last August, we’re poised for growth,” he added. “We couldn’t have predicted this hardening market when we did this deal and, with hindsight, our acquisition was the right move at exactly the right time.”
But while some re/insurers would now describe property cat rates to be adequate, Hamilton does not consider them to be high enough to push the limit of its risk appetite.
For that, rate increases will have to go further, but Brown is optimistic about the possibility of pricing momentum lasting into next year.
“We expect firming to last well into 2021,” he told Reinsurance News. “While we are not yet at the historic highs after 9/11, given the active hurricane season combined with other market uncertainty, we feel rates will keep firming.”
However, when it comes to adjusting pricing based on catastrophe activity, Brown feels that the market is increasingly in new territory due to the effects of global warming.
“Current models reflect all years for which there’s recorded data, but models are largely backward looking,” he noted. “If you try to be forward looking and account for climate change, past history is no predictor of future activity.”
Brown argues that re/insurers need to develop hurricane forecast models that go beyond predicting the intensity and track of a single storm.
Instead, he feels the market should aim for a global climate model that simulates weather over the entire globe and does so for thousands of model years to generate the ensemble needed to calculate distributions of possible intensities and tracks.
“In the meantime, suppose the risk of a Harvey/Irma/Maria event is several times what we think it is,” Brown cautioned.
“Insurers will suffer losses until they bump into their risk tolerances. This will restrict supply at the same time that recent losses boost demand and adjust prices to about where they ought to be.”
