BMS Re: solving the unsolvable in 2022
“2022 will be a year that we don’t want to revisit any time soon,” says Pete Chandler (pictured), president and chief executive officer at BMS Re, reflecting on the past 12 months and expressing a sentiment most in the industry will appreciate.
And what an eventful year it’s been, with a hard market, soaring inflation and the impact of Hurricane Ian, to name just a few things. But, he says: “On a macro basis, the industry on the whole—both insurance and reinsurance—remains well capitalised.”
The past year has seen the hardest hard market for decades and while Chandler says that the current “very challenging market” could be attributed in part to Hurricane Ian, he believes that the main driver has been the leverage effect of inflation on the industry.
“It has caught us all flat-footed. I hate to say that because I think our industry is extremely nimble. But the internal and external cost of capital has challenged us all on our reserves adequacy.”
The arrival of Ian in September and the impact it had on Florida, which was already a stressed market, was yet another disruptive element to add to the mix, he says.
Even before Ian hit, the pull-back from property-cat was evident. “It has been a year where, amazingly in the aggregate, we’ve seen certain underwriters literally say they don’t know how to underwrite property-cat any more.”
Chandler calls this “fascinating” in a class of business that has “been around forever” and has more analytical firepower than any other line of business. Even with this arsenal behind it, property-cat started looking embattled. Chandler says that the leveraged impact of inflation and the continued losses from weather-related events, combined with a loss of confidence in off-the-shelf modelling, “has created an environment we have not ever seen in our industry”.
