In response to the challenging dynamics of the global reinsurance market, Youi, a prominent Australian insurance company under the Outsurance Group umbrella, has decided not to renew its aggregate reinsurance for the 2024 financial year.
This strategic move reflects a broader trend in the industry as insurers grapple with escalating natural perils losses, pandemic-related business interruptions, and inflationary pressures.
The decision was disclosed by Outsurance Group Chief Financial Officer, JH Hofmeyr, who discussed the evolving reinsurance landscape and its impact on the group’s risk management strategy.
The move marks a pivotal moment for Youi, which has historically relied on aggregate natural perils treaties to manage its risk exposure to large-scale catastrophic events.
The global reinsurance market has been witnessing a significant hardening trend since 2021, driven by increased losses from natural perils and the effects of rising inflation.
Australia, in particular, experienced a surge in both the frequency and severity of natural disasters, prompting a robust response from the reinsurance market. As a result, aggregate natural perils treaties, once a staple of Youi’s risk management framework, are no longer available at affordable rates.
Starting from July 1, 2023, Youi will shift its reinsurance approach by participating in the Cyclone Reinsurance Pool, a government-backed initiative aimed at providing coverage for cyclone-related claims.
This strategic shift is expected to significantly reduce Youi’s exposure to large cyclone events, consequently reshaping the company’s reinsurance structure for the upcoming financial year.
In addition to the challenges faced by its Australian operations, Outsurance Group’s South African market has also witnessed a surge in reinsurance costs. This spike is attributed to pandemic-related business interruption losses and notable events like the KZN storms in 2022.
However, Hofmeyr assured stakeholders that the increased catastrophe retention, while higher than previous levels, remains well within the company’s risk appetite and is supported by a strong balance sheet.
Furthermore, Youi announced its plans to remove the remaining 10% quota share on the BZI book, effective from July 1, 2023. This move demonstrates the insurer’s commitment to refining its risk management strategy in response to the evolving market conditions.
