Pricing close to bottom of cycle: Charman

The market is nearing the bottom of a very aggressive pricing cycle, according to John Charman, chief executive of Endurance Specialty, who added that competition in the market is healthy.

Charman was speaking at the Standard & Poor's Ratings Services' 30th Annual Insurance Conference this week. He added that the secret of underwriting is to have an embedded knowledge of the underlying risk.

“That flow of capital into our business in search of higher returns is inevitable," said Charman. “It's created a more-competitive landscape, and it's also changed underwriting behaviour.”

In the context of the vast quantities of alternative capital that has entered the market, which it is estimated could be as much as $100 billion during the next five years, he said has accelerated competition within the market.

But "it's strong, healthy competition that we're facing," said Charman, who added that it's the underwriting discipline and expertise that distinguishes reinsurers amid mounting competition.

"The secret of underwriting is to have an embedded knowledge of the underlying risk, to be able to manage exposures and risks," he said.

But he believes the downward pressure is starting to come to an end. “We are beginning to get to the bottom of a very aggressive pricing cycle," said Charman. "You always know you're getting to the bottom when terms and conditions start to expand."

He added that when the "front end of the business isn't really getting paid for the risk they're assuming," they'll gradually step back. "Which is what's happened."