The need for growth
There’s always plenty to discuss at the annual Rendez-Vous de Septembre. The market spends at least part of the summer figuring out big ideas, talking points, and scripts for the spontaneous remarks we’re all expected to have.
Of course, this year, it didn’t quite work out that way. The best plans of Augustmattered much less than anticipated. Hurricanes Harvey and Irma made landfall and are expected to cause significant industry losses. The storms dominated the share of mind and voice, as one would expect, bringing a new sense of urgency to an event that had settled comfortably into what can only be described as an annual gripe about a protracted soft market.
That time the plans didn’t matter
Many probably spent the summer looking for ‘something to talk about in Monte’, digging deep for a few ideas that would make them stand out at the tables in Café de Paris. I’m no different. When the storms came, my talking points became seemingly irrelevant—but I’m not ready to let them go.
We need to bring new risk into the market, and even a shift in rates post-event (if it happens and to what extent) is a temporary response to a likely inevitable future rate slide over an eventual string of loss-light years.
My team and I spent the summer focused on specialty lines, with the launch of PCS Global Marine and Energy in April and PCS Global Cyber at the beginning of September reflective of our efforts to help expand the insurance-linked securities (ILS) market. We believe—through extensive conversations across the market—that specialty could provide an important opportunity to expand the ILS sector’s global footprint.
Room temperature isn’t always comfortable
When you look at any of the global rate on line (ROL) charts produced after each of the major renewal milestones, you can see a pretty clear trend. Post-event market hardening has declined over the past 30 years. Read such charts from left to right, and the spike after Hurricane Andrew was the last big one, with ROL surges following the terror attacks of September11, 2001, the 2004 and 2005 hurricane years, and the 2008 financial crisis (with a pair of hurricanes, as well) becoming progressively smaller. Sandy in 2012 barely made a mark on the ROL charts.
Through improvements in risk and capital management over the past handful of decades—in conjunction with a significant increase in capacity available and the maturation of the ILS sector—rate increases following a loss event have become less pronounced. And while we have yet to see the combined effect of hurricanes Harvey and Irma (PCS has yet to release estimates as of this writing), it seems worth risking the assumption that it’ll fall in line with the ROL evolution we’ve all seen.
