Reinsurance market could face mid-year upheaval as cat capacity remains fickle: Conduit

The reinsurance market could show some degree of upheaval at pending renewal deadlines into mid-year as evolving capacity forces some cedents to change strategy, officials at  Conduit Re have argued.

"We think there are some parts of the market coming up - Japan at end-Q1, North American windstorms mid-year - where we expect to see some changes in the way reinsurance products are bought," Greg Roberts, Conduit's head of property, told an investor conference on January renewals.

Comments follow word of strong aggregate rate gains in the January renewals, but on a market that fragmented as players herded into safe zones to dampen some rates while eschewing some loss-hit segments to let those rates soar.

Conduit, an upstart property, casualty and specialty reinsurer, swept up during the season, increasing its premium take by 70% year on year. Gains included an adjusted rate increase which Conduit puts at 5% after adjusting for inflation, exposure and other key terms and conditions.

But January renewals saw cedents work to bundle contracts and exposures, an effort that worked as "a bit of a break on growth for us," CEO Trevor Carvey (pictured) said. Long-tail got mixed with short-tail in bundled programs with "less transparency" available in deals, Carvey indicated.

The Conduit preference:  to pick and choose exposures at a reinsurance smorgasbord where Conduit can turn up its nose at messy segments like cyber or ring-fence its cat exposure, especially to protect casualty lines, officials said.

"We think the market is heading in that direction and we are preparing ourselves to be a part of that," Roberts said.

Dwindling capacity in some loss-hit segments could exacerbate the market shift.

"There have been a lot of people withdrawing from cat in the market," Neil Eckert, Conduit's executive chairman, told the conference. "We could well see a shortage of capacity as the year develops."

Cyber ranks high amongst the specialty lines Conduit hopes to avoid. Cyber threats continue to evolve too quickly with "always something that is the new challenge" and contracts on the market haven't yet moved sufficiently to cut off aggregated risks.

"For us, the main metric has to be tighter event caps around systemic loss," Carvey said when asked what would have to happen for Conduit to venture into that market.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.