Brokers push reinsurers on risk as carriers signal stability: Monte Carlo

Ahead of the Rendez-Vous de Septembre in Monte Carlo, the big four reinsurers gave the impression of stability, while brokers stuck with the rhetoric that reinsurers need to take on more risk.

In a press conference that took place in the run-up MeetMunich Re board member Thomas Blunck said the central message from Munich Re “is that our risk appetite, our strategy, our setup continues,” he said. “No big changes, broadly speaking. Pretty stable.”

He also noted that while global reinsurance capacity is robust enough to handle demand, there is “certainly no excess capital” in the market.

During Insurance InsiderAt Blunck’s Day 1 virtual roundtable, Blunck described the market environment as “fragile” and said the current market balance is “susceptible to change.”

Scor P&C CEO Jean-Paul Conoscente added that the mid-year renewals set the stage for a more competitive reinsurance market in 2025.

He explained that “appetite continues to come with high return expectations and available capacity remains insufficient to meet growing sponsor demand.”

On the casualty market, reinsurers noted that the market was “converging” around a “negative” view of the US casualty business, indicating an increase in upward pricing pressure on 1 January.

The comments come amid growing anxiety about the state of the 2015-2019 US casualty years, for which some reinsurers have again booked extensively, and the more recent 2021-23 casualty years.

Scor group managing director Thierry Léger said in an interview with this publication that reinsurers may have been “too optimistic” about the health of younger accident years, which had previously been considered more stable than years pre-Covid-19.

Axis CEO Vince Tizzio echoed that view, calling the crash a “bumpy” business class. He said: “We don’t say much in liability reinsurance.”

He added that Axis is “not trying to trade volume”, with its growth in the class this year being driven entirely by rate.

Similarly, Swiss Re’s P&C Re CUO Gianfranco Lot said in an earlier press conference Meet that Swiss Re will continue to be “very cautious” on US liability lines given the stress in business class.

Reinsurers also stood firm in their view that higher retentions have returned them to their true reinsurance roots.

Hannover Re said securing higher retentions in its North American cat business over the past two years had led to “satisfactory results”.

There has been a clear appetite from reinsurers to grow, although it comes with a degree of caution. Reinsurers have been badly burned over the past decade and are looking to insulate themselves from the growing threat of secondary perils.

For most, this means maintaining high attachment points and refusing aggregate trades to reduce their exposure to medium-sized events.

Sven Althoff, board member at Hannover Re, said the 2024 loss experience “will certainly have an impact” on individual market dynamics by region and line of business.

“The market will look to defend its profitability, which has finally reached adequate levels after years of weak market conditions,” he said. “For 2025, we expect more stable supply and demand as reinsurers’ improved yields will allow them to gradually increase their ability to meet customer demand.”

Swiss Re, Munich Re, Hannover Re and Scor head into the fall with a stellar 2023 under their belts and a very likely profitable 2024, hurricane season willing.

Overall prices have continued to rise at each major renewal so far in 2024 and no sharp reversal is expected.

Continued growth in coverage demand, coupled with a lack of new capacity entering the sector, is also in the quartet’s favor – although a second year of outstanding returns could attract more capacity in 2025.

brokers

Some brokers, however, have stepped up rhetoric about the need for reinsurers to take on more risk.

“If the reinsurance market is to deliver real value, it needs to play a more active role in helping insurers manage frequency losses and earnings volatility,” said Rupert Moore, UK CEO of reinsurance solutions for Aon, in broker’s reinsurance renewal report.

In a video with Insurance Insider TO Meetco-CEOs for EMEA at Aon Reinsurance Solutions Alfonso Valera and Tomas Novotny were also upbeat in defense of clients.

“We would like to see reinsurers take on more risk as opposed to avoiding risk, which we think has happened,” Valera said.

He added that customers were “demanding” this change and Aon will “ask reinsurers to have more skin in the game” during renewal talks this year.

Novotny called on reinsurers to “work on” their relevance and start supporting customer interest with volatility solutions.

On the other hand, Gallagher Re CEO Tom Wakefield noted during the Day 1 roundtable that insurers face “challenges in balancing revenue growth in a weakening market with investor expectations to manage volatility.”

He added: “It is important to strike a balance to avoid severe cyclical swings and maintain market efficiency.”

Guy Carpenter’s managing director of global specialties, James Boyce, also said the cedants would “ask for more consistency in wording, improvements in terms and conditions and more flexibility in terms of attachment points” during renewal talks.

He added that the global specialist reinsurance market is now in a period of “relative stability” following the recent “market turmoil”.

With strong rating adequacy achieved across many lines of business, Boyce said capacity is available to meet demand outside of a few challenged areas. He noted that there is increasing consistency in the coverage available.

He cautioned, however, that much of the turmoil in recent years has resulted from predicted losses that have yet to materialize.

“While the sector has experienced some sizeable events, we haven’t seen the catastrophic financial impacts – which have underpinned a large proportion of the rate increases – coming through to the market,” he said.