Secondary perils force rethink of capital and reinsurance buying: Everest Re

Secondary perils force capital and buying shifts across Europe, Everest says.

Key point:
Cedants expect more than capacity
Underwriting discipline remains critical
Risk concentrations need closer scrutiny

Secondary perils are no longer sitting at the edge of European catastrophe portfolios. Flood, hail and severe storms are increasingly influencing underwriting decisions, capital allocation and reinsurance purchasing, forcing insurers and reinsurers to look more closely at where risk is building and how it should be priced.

Harald Jacobsen, head of reinsurance Continental Europe at Everest, says recent loss activity has reinforced how much these risks now matter to portfolio management.

“Secondary perils have become a significant driver of insured losses across Europe,” he told Baden-Baden Today. “Recent loss activity has reinforced that secondary perils are no longer secondary from a capital and portfolio management perspective. 

“They are increasingly shaping underwriting decisions, portfolio construction and reinsurance purchasing strategies.” 

The shift puts more pressure on insurers to understand concentrations at a much finer level. Jacobsen believes better data, analytics and technology are improving the industry’s ability to model these risks, but warned against relying on models alone.

“Secondary perils remain complex and require a combination of model output, local expertise and underwriting judgement,” he said. “Discipline remains critical to ensuring risk is appropriately understood and priced.” 

Granular view

For insurers, the response starts with pricing the exposure properly and continually reassessing where concentrations are developing.

Jacobsen pointed to more granular portfolio management, stronger data-led underwriting and closer scrutiny of aggregation risk as priorities. Reinsurance then must be structured around the actual shape of the portfolio rather than treated simply as additional capacity.

“The journey starts with insurers’ confidence that the perils are adequately priced,” he said, adding that insurers should work closely with reinsurers to structure solutions that support long-term portfolio resilience. 

That is becoming more important as the broader European market becomes more balanced and predictable while risks become more complex.

Jacobsen said clients are increasingly looking beyond price and capacity to reinsurers that can help them navigate emerging exposures and longer-term uncertainty.

“Success will come from combining underwriting expertise, analytics and capital solutions to support sustainable growth. The value of reinsurance increasingly lies in helping clients understand how their risks are changing, anticipate potential pressure points and develop solutions that support their long-term objectives,” he emphasised.

“Secondary perils remain complex and require a combination of model output, local expertise and underwriting judgement.”

New exposures

The same discipline is being tested by the energy transition. Growth in renewable infrastructure is creating new technologies, asset classes and operational risks that demand specialist knowledge, Jacobsen said. For insurers and reinsurers, the opportunity is significant, but he noted that expansion must be matched by a better understanding of how those assets behave and where losses could emerge.

“The energy transition is creating new technologies, asset classes and operational risks that require specialist expertise,” he said. “Everest brings together dedicated renewable energy capabilities and expertise from across the business to help clients understand and manage these evolving exposures.”

As renewable infrastructure scales, product development and risk insight will have to keep pace. But Jacobsen rejected the idea that supporting innovation requires looser underwriting standards.

“Supporting innovation does not mean compromising underwriting fundamentals,” he said. “On the contrary. Long-term success depends on maintaining discipline while helping clients navigate emerging risks and being there for them for what comes next.” 

Partnership test

That combination of technical discipline and broader support, he said, is also changing what clients expect from reinsurance relationships. “Partnership today is about more than capacity,” he said. “Clients value responsiveness, technical expertise and consistency across market cycles.” 

He sees data and technology as part of that relationship rather than a substitute for underwriting expertise. Better data can sharpen risk selection and help identify trends earlier, while advanced analytics can improve understanding of exposures as they evolve.

“Technology is an increasingly important enabler, but it complements, rather than replaces, underwriting expertise,” Jacobsen said. 

He identified one of the main challenges for the European market as “balancing growth with underwriting discipline” while still offering solutions that help clients manage increasingly complex risks.

He also sees tailored reinsurance playing a larger role in helping insurers use capital more efficiently, particularly where standard solutions no longer reflect the shape of the underlying exposure. Everest’s strategic reinsurance capabilities enable clients to access bespoke structures aligned to specific portfolio, capital and risk management objectives. 

The priority for Everest Re is to continue to deepen the company’s relationships across key markets, engage early in strategic discussions and developing cutting-edge solutions for emerging and evolving risks, leveraging specialist expertise across the business, including dedicated renewable energy capabilities within its marine & energy team.

“We want to support clients with tailored solutions for increasingly complex risks,” Jacobsen said, while making sure the structure, pricing and capital deployed continue to reflect how those risks are changing.

“The strongest partnerships are built on shared objectives, transparent dialogue and a long-term commitment to creating value - together,” he concluded.

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