27 July 2016 Insurance

Exclusive: Everest Re to boost insurance; claims reinsurance prices bottoming out

Everest Re plans to double its insurance business in the next years while it sees rates in reinsurance bottoming out.

Over a period of three to five years Everest's insurance business could easily double in size, Dominic Addesso, president and chief executive officer (CEO) of Everest Re Group, claimed during the company’s second-quarter results presentation.

Everest’s insurance operations recorded $1.53 billion in gross written premiums in 2015, according to its second quarter 2016 investor presentation. Its combined ratio was 106.3 percent.

“We continue to capitalise on the dislocation within the commercial market to build out our global specialty insurance capabilities with newer and enhanced products, additional leadership and underwriting depth and expanded geographic reach. Each of our operations are making excellent progress on their 2016 goals and we anticipate increased momentum from actions executed over the past year,” Jonathan Zaffino, senior vice president and president of the North America insurance division, explained.

Growth in the insurance book is beginning to take hold as growth premiums increased by 32 percent in the second quarter compared to the previous quarter, Addesso noted. “On the other hand somewhat offsetting this is the decline in the reinsurance segment. Rate levels and foreign exchange movements continue to affect the sector."

On a positive note, pressure on reinsurance rates is falling, management suggested. It does appear that in certain sectors “we are hitting bottom,” Addesso said. “I do think that at these levels there isn’t any room to go lower if you want to retain any adequate returns on your capital,” he noted. “Those are the pressures we all face and we are seeing some discipline in the marketplace for now,” he added.

“We continue to find pockets of attractive long-tail reinsurance including auto liability business and we also continue to provide meaningful capacity in the mortgage space where there remains a robust pipeline of attractive business,” John Doucette, executive vice president and president and CEO of the reinsurance division , said.

Everest sees opportunities to grow its reinsurance business due to macro issues including capital and Solvency requirements created by the market turmoil including Brexit, Solvency II, Dodd Frank and related regulatory changes around the globe, Doucette said. Profit and expense pressures at large clients were now motivating them to buy more reinsurance, he added.

In addition, rates in some markets are increasing in regions that were affected by catastrophe losses, which were up in the second quarter, impacting profitability of the re/insurance sector. For Everest, catastrophe losses, net of reinsurance, amounted to $123.8 million in the second quarter.

“In Canada, the Fort McMurray wildfires loss is the largest insured loss in Canadian history and reinsurance rates were up substantially. We seize the opportunity to deploy more capacity at higher pricing,” Doucette said.

Other areas which suffered catastrophe losses recently, which include an earthquake in Ecuador and hailstorms in Texas, also showed increased rates at July 1, Doucette noted.

Overall, rumours suggest that brokers are now shifting to managing client expectations on renewal pricing terms and conditions, he added.

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