Hiscox identifies market cycle changes
The current stage of the market cycle is different from what the market might have expected, Mike Krefta, chief executive officer of Hiscox Re & ILS, told Monte Carlo Today.
According to Krefta, there has been a structural change to where the lowest cost of capital wins business.
An abundance of capital and the fluidity of that capital between different entities means that the marriage of risk and capital has become faster and smoother. As a result, this current cycle differs from the typical market pattern, which was characterised by a cyclical return to pricing environments over time.
In this new type of cycle, rates are moving due to structural forces and often in different parts of the risk pyramid at the same time.
“If you take the last cycle that we saw in 2005/06 onwards, it was retro policies that went up, then reinsurance went up, and then we saw primary rates catching up afterwards, as they write primarily throughout the year rather than at seasonal points as we do in reinsurance,” Krefta said.
“We’re a writer of retro as well as a writer of reinsurance and retail, so we see all those dynamics playing out. We also have an ILS fund, which is at $1.6 billion of assets under management.
“The Hiscox Group, because of its optionality and its diversity, sees all the changes within the broader group,” he explained.
On renewals, Krefta said that rates in Japan will be interesting to watch after significant rate increases for Japanese wind contracts on April 1, something that was no surprise given the number of Japanese typhoons in 2019, he noted.
