Peak Re overhauls its stance with major book review amid 2022 loss
Hong-Kong based reinsurer Peak Re swung to a net loss of $81 million in 2022 on the one-two of heightened nat cat losses and a rugged bond market, all the while repositioning its books and fighting off the retrocession market clinch to take the edge off its books.
“While we recorded further premium growth during the year thanks to strong 2022 renewals, our bottom-line results were impacted by significant mark-to-market losses on our fixed-income investment portfolio and continued high levels of catastrophe losses,” CEO Franz-Josef Hahn (pictured) said.
Peak Re grew gross written premiums by 7.0% to $2.3 billion but upped its use of retrocession protection, pushing net earned premiums down by 12.8% to $1.5 billion. Top-line premium growth was driven primarily by higher business volume in Japan and Europe, Hahn noted for shareholders in the annual letter.
In P&C, Peak Re grew gross written premiums by around 11% to $2.02 billion, claiming a build-up in the portfolio at both the January and April 2022 renewals.
Peak Re spent parts of the year repositioning and diversifying its portfolio in response to capital market volatility and the dislocation of the retrocession market, Hahn noted. The group moved away from regions with rising cat experience, shrinking the US book from a third to a quarter of the global portfolio. Mark the home markets of Asia-Pacific at 61% of GWP, versus 23% from the Americas and 16% from EMEA. In turn, Peak Re grew its motor, accident & health and pecuniary business lines.
Catastrophe losses, including floods in Australia and South Africa, drought and hailstorms in Europe and hurricanes in the US, took the blame for a rise in the combined margin to 101.4% to render the $18.2 million technical underwriting loss.
As the group adapted to a tightened retrocession market with weakened proportional capacity, Peak Re bought more global cat XoL capacity and additional coverage for Japan Wind. Peak Re faced off against a tough ILS market, but did lay claim to the first ever 144A cat bond placed in Hong Kong, a $150 million deal placed through SPV Black Kite Re, enabling the group to go ex-America on its cat-XoL.
Peak Re has since leveraged the hard market to take a 1/1 renewal portfolio reduced in premium terms, but likely up in margin, officials wrote in the full-year report.
“Peak Re materially reduced its top line in the January 2023 renewals while exceeding our pricing targets on all fronts,” management told shareholders. “We wrote less natural catastrophe risk in Europe and the US and improved the terms and conditions of our book.”
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