How brokers can grow in a hard market: Inver Re’s Hearn
When market turbulence strikes and the quest for suitable solutions intensifies, brokers don their transformative guise. Armed with the tools of analytics, fortified by long-standing relationships, and driven by a commitment to diversification, brokers become unwavering pillars of support, guiding their clients through every facet of the market cycle.
That is according to Steve Hearn (pictured), chief executive officer of Inver Re, speaking in the context of the role brokers play in resolving the tensions between reinsurers and cedants, while simultaneously addressing the delicate equilibrium between capacity and risk appetite in a hard market. Hearn will expand on his thoughts further at the upcoming Re/insurance Outlook Europe conference, being held in Zurich, June 19–20.
“You might think a broker’s job would be no different in hard or soft market conditions, that we should provide value throughout that cycle. But the reality is that it is different,” Hearn says. “When there is a surfeit of capacity and the industry is struggling to provide solutions, the broker becomes more important.
“You can use things such as analytics to differentiate your client’s proposition from its peer group. You can emphasise the advantages of partnering with them in terms of reinsurance capacity, the longevity of relationships and their importance in a hard market. Brokers have a big job to do in reminding all parties of the importance of that. It is a hugely important ingredient in all aspects of the cycle.”
There has been a significant decline in the amount of dedicated capital to the reinsurance sector. With double-digit declines, estimated at between 10 and 20 percent compared to 2021, Hearn believes the downward trend will only continue.
“The factors that have been driving that sort of dynamic continue to feature and don’t seem to show an end. We have another test coming through the June and July renewals, and as far as I’m aware, no flood of new capital is arriving,” he says.
“I’d be very surprised if we don’t see a further deterioration in the capital dedicated to reinsurance.”
Expanding horizons: diversification and specialty lines
In light of these circumstances, Hearn puts forth diversification as a crucial and radical suggestion, including pursuing greater geographic spread and exploring new lines of business. He believes that would create a more balanced market and a greater equilibrium.
“We’re in an environment of scarce capacity of capital. A big play here is of course, diversification. That’s what should be happening, but I just don’t see any big shift,” he says.
