Greenlight Re CEO sees no sign of rate improvements

While reinsurers like Swiss Re see rates improving after major nat cat losses in the third quarter, the Greenlight Re CEO is skeptical about an imminent market turn.

“So far we see no sign of improved pricing,” Greenlight Re CEO Simon Burton, said during the company’s third quarter results conference call.

“We should be prepared for the scenario that rates improvements are muted by large capital injections,” Burton warned.

Market observers expect that an estimated $100 billion of insured losses in the third quarter of 2017 will make rates rise after several years of softening particularly in the property/casualty business.

Swiss Re chief financial officer David Cole, for example, said during the third quarter results media call that “this type of [nat cat] event typically is a catalyst for an inflection point.”

“Based on early discussions this is something we see now emerging,” Cole added.

The reinsurance industry is preparing to take advantage of rate increases particularly in the affected areas. But not Greenlight Re.

“Our view is that rates will have to move significantly, considerably further than we are expecting to see to consider committing more capital,” Burton said.

“We’re not at all a cat company, we do assume some cats, it is fairly moderate compared to our peers,” he noted.

“Our overall appetite to catastrophe risk as a proportionate surplus will not materially increase into 2018 based on our reviews of the likely margin expansion,” Burton added.

For the third quarter of 2017, Greenlight Re reported net income of $19.9 million compared to net income of $30.0 million for the same period in 2016. The company posted an underwriting loss of $38.5 million for the third quarter compared to underwriting income of $0.6 million in the same period of 2016.

Included in this underwriting loss is an estimated loss of $37.9 million resulting from natural catastrophes including hurricanes Harvey, Irma and Maria and the Mexican earthquake.

The combined ratio for the nine months ended September 30, 2017 was 107.0 percent, compared to 105.3 percent for the prior-year period. Catastrophe losses contributed 7.8 points to both the composite and combined ratios for 2017.

Net investment income of $64.0 million for the third quarter of 2017 represented a gain of 5.5 percent year on year.

“It is clear that we have only scratched the surface of the strategic potential, and we are now well underway in taking steps to realize that potential,” Burton said.

“As we continue to face rapidly shifting industry changes in the areas of distribution, technology, capital sources and many others, a small company like ours can response to new opportunities, scale only judiciously and maintain an industry leading expense ratio. We continue to expect that advances in the efficiency with which business is placed will play directly to our strength and we have taken steps to be an adopter of those efforts,” he added.

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