The impact of Hurricane Ian on an already stressed property market is expected to be significant and contribute to a much more challenging 1/1 renewals, but further tightening in the catastrophe space could be a tailwind for reinsurance broker Guy Carpenter, according to executives.
Earlier today, Marsh McLennan (MMC) reported a robust set of results for the third quarter and first nine months of 2022, which included solid revenue growth across the business, including at its reinsurance division, Guy Carpenter.
In fact, Guy Carpenter has now achieved underlying revenue growth of at least 7% for six of the last seven quarters, while underlying growth for 9M 2022 of 10% took revenue for the period to $1.8 billion.
It’s no secret that current market conditions are particularly challenging for some, and in areas like property cat, which have been difficult for a while, the damage caused by Hurricane Ian has only exacerbate the situation ahead of the key January 1st, 2023, reinsurance renewals.
“Ian has the potential to be the costliest insured event in Florida’s history, and the second most damaging insured loss of all time,” said John Doyle, incoming President and Chief Executive Officer (CEO) of MMC during an earnings call earlier today. “While the ultimate insured loss won’t be known for some time, the impact on an already stressed property market will be significant. At mid-year reinsurance renewals, the property markets were already exhibiting strains. Following Ian, the property cat market is likely to tighten even further, and perhaps see a significant supply / demand imbalance.”
“We’re likely headed to a much more challenging January 1st reinsurance renewal,” he added.
It seems that for buyers of property cat reinsurance, the January 2023 renewals season is going to be particularly tough, as rising demand is met with a reduction in supply as some providers have retreated from the space in an effort to lower volatility.
As noted by Doyle, this was evident prior to Ian’s landfall in late September, so it’s safe to assume that the storm’s impacts in Florida and beyond has made the situation even more challenging, with further hardening expected as reinsurers respond to rising loss costs and the inflationary environment.
Addressing Ian’s influence on the property cat market, Dean Klisura, President and CEO of Guy Carpenter, explained that demand for his firm’s solutions and advice remains very strong.
“Demand for reinsurance, including cat property, is expected to remain very strong as our clients manage volatility and continue to address systemic risk, including cyber and the impacts of climate change in the emerging perils we’re seeing around flood, wildfire and convective storms around the world, continue to accelerate and concern our clients,” said Klisura.
Klisura agreed that Ian “will certainly create challenging market conditions on January 1 in the property cat space.”
However, for reinsurance broker Guy Carpenter, Klisura, reiterating Doyle, said that “a tightening cat market could be a tailwind”, adding that the company has “a track record of strong growth in any market conditions.”
“We feel we’re very well positioned to continue to create value for clients and grow our business moving forward,” said Klisura.
Commentary from insurers, reinsurers, brokers, and analysts suggests that further reinsurance rate hardening at 1/1 is inevitable, and there will of course be winners and losers. Exactly how high rates trend upwards in places like Florida remains to be seen, but it’s apparent that supply is already outstripping demand in areas.
