Softening isn’t the story: Specialty needs a seat at the table, says MS Re’s Bruniecki

Softening rates will dominate Monte Carlo, but specialty lines tell a more complex story that must be on the table, says MS Re’s Jörg Bruniecki.

Key points:
Geopolitical risks are rising
Aviation clarity needed
Cyber market at crossroads

“There is a lot of talk of softening due to an over-supply of capital as reinsurers look to grow,” Bruniecki, chief underwriting officer for global specialty lines at MS Reinsurance, told Monte Carlo Today. “But that is only part of the story.”

That story is particularly evident in specialty lines where the market reflects both geopolitical turbulence and structural change. Aviation is a case in point. 

“There is a lot of talk of softening… but that is only part of the story.”

“There has been a focus on aviation due to losses that occurred when planes were seized in Russia, and it was important that the reinsurance industry stepped in to provide the capital and stability required,” Bruniecki said.

But significant questions remain over how such risks are defined and priced. “Going forward, it is essential that there is clarity over cover – do they fall under the war umbrella or the all-risk umbrella – and that these perils are priced accurately to reflect the risk,” he said.

Cyber is at a crossroads, too. “There has been much more sharing of experience between clients and reinsurers to get a better understanding of how the tail of the event is affecting businesses,” Bruniecki said. “The challenge now is proving its real value. If we can do that, there is potential to grow the size of the cyber market.”

Political violence is another area where exposures are climbing. “The market is complex and changing quickly. In an era where wars and civil wars are becoming more likely, there is a growing probability that we will see more acts of terrorism and political violence,” Bruniecki warned. “Current levels of geopolitical volatility have highlighted the importance of political violence insurance, and we must be mindful to ensure we are pricing these adequately to cover the risk.”

International geopolitical volatility is certainly a concern for many businesses, and the knock-on effects are playing out across supply chains. “Supply chains are experiencing significant disruptions, increasing the potential for unmitigated post-loss inflation following a significant event. This concern is not only limited to cost but also to time, with business interruption losses potentially significantly exceeding levels historically seen,” he said.

Tariffs and trade disputes are adding another layer of unpredictability. “The trade war which is being waged by applying tariffs is a big factor of uncertainty, especially in specialty classes with longtail exposures like engineering, political risk and trade credit.”

Against this backdrop, demand for specialty coverage is growing. “Insurers are looking for tailored offerings to meet the unique needs of niche sectors and successful reinsurers will be the ones to bring this expertise and appetite to the table,” Bruniecki said.

He believes despite some returning capacity, stability remains likely. “Despite the influx of capacity, particularly in the marine and energy reinsurance markets, we are anticipating a generally stable rating environment,” he said.

A ‘very normal’ 1/1?

Looking ahead to January renewals, Bruniecki anticipates less drama than some expect. “The demand and supply dynamics will continue to evolve over the coming weeks, but this could be a very normal renewal period,” he said.

The latest quarterly and half year results from reinsurers show that the industry is still profitable, he noted, but capital flows are nuanced. “The only new capital coming into the market is collateralised through ILS structures such as cat bonds and it is going into the nat cat space because that tail risk is well-modelled. Investors understand it, and they can move in and out quickly.”

Traditional players also have room to manoeuvre. “Traditional reinsurers are sitting on large pools of capital in the form of retained earnings that they have not returned to shareholders,” he pointed out. “They have the opportunity to grow, but will they grow for the sake of it? Or will they genuinely exercise underwriting discipline? I expect the discipline around retention levels to remain. We need every player in the value chain to be invested in the management of risk.”

Beyond the cycle

For MS Re, Bruniecki said success lies in resisting short-term swings. “Our approach is to build long-term relationships with clients that will endure beyond annual renewals. To do that, we spend time getting to know the client, what their path to success looks like, and how reinsurance can help them to achieve that success.”

That also means being easy to work with. Bruniecki pointed out that the company has completed a technology transformation, giving it “a platform that is very easy and efficient for our clients to use.”

“In an era of global volatility, there has never been a greater need for reinsurance and for reinsurers who offer clients genuine long-term partnerships as a carrier of risk and not just a trader of risk,” he concluded. 

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