In a complex risk environment, and with renewals approaching, it is important for reinsurers to maintain discipline, said David Govrin, SiriusPoint’s Chief Underwriting Officer, at the Rendez-Vous de Septembre in Monte Carlo.
“Market conditions for reinsurance have steadily improved in 2023. We are seeing improved economics for property cat, as well as casualty, and I think we’ll continue to see this rate momentum, with further hardening expected at 1/1,” said Govrin.
According to the CUO, there are some that believe that we will see a repetition of the market conditions post-Katrina at 1/1, where US property-catastrophe business continued to remain hard; but these conditions were not replicated in other geographies, he noted.
Govrin highlighted: “The thing I would caution on, is that risk in general has become a lot more complex to price. There’s a lot of volatility in risk, a lot of uncertainty whether it’s inflation, climate change, or social inflation. For reinsurers especially, it’s important to maintain discipline. That will be key, especially as we approach renewals.
“I think in the past, pricing was typically driven by events. Capital gets depleted, there is supply-demand imbalance. But crises change, and this market isn’t like that. Clearly prices have gone up but most carriers continue to maintain conservative assumptions with respect to casualty loss cost inflation given the uncertainty, for both pricing and reserving.”
Monte Carlo is the start of the discussions for the 1:1 renewals, and property is always the main topic, but according to Govrin “we still need to wait and see what happens” as a lot depends on what could take place in the rest of Q3 and Q4.
“I think the property market is still going to remain strong,” he highlighted. “As you know, we’ve rebalanced our portfolio, and reduced our property cat exposure, with a view to reducing volatility. However, we still write property cat, both international and US, but we have reduced our PML’s over the last two years and are more weighted to US cat with the majority of our reductions being international cat and ground up cat risk worldwide.
“So I think there is adequate capacity for property cat and the big discussions will be from the ceding companies looking for expansion of coverage into the more frequency / earnings protection coverages.
“With casualty and specialty, there’s a lot of demand from reinsurers, especially for reinsurers that don’t have primary books of business which has the potential to put pressure on price, terms and conditions in those lines. However, I think reinsurers will remain disciplined across most classes of business.”
