Any chance of UK rate hikes has gone now: buyer

Given some of the headlines and predictions of big rate hikes in the aftermath of the 2017 cat losses in the US, most buyers will be pleased with what remains a relatively stable environment for rates as they head to Monte Carlo, Mark O’Riordan, group reinsurance director at Ecclesiastical, told Monte Carlo Today.

“If you had said to me at the end of the hurricane season last year, that we would be in this position nine months on, I may not have believed you,” O’Riordan said.

“There were certainly some tough conversations happening back then, but it was not a capital event and as a result we have not seen any significant rating action within the market.

“Our perception is that, generally speaking, reinsurers did not achieve the rate increases they were seeking at the end of last year and we reported a stable renewal to our board following completion of our placements.

“Given that situation, I believe the ability for reinsurers to seek rate increases for January 1 has dissipated to a large extent. There is still abundant capacity in the market, which is fuelling continued strong competition, so I cannot see any significant changes happening now—especially as the environment has remained fairly benign.

“Any chance of rate increase, at least in our home market of the UK, I believe has gone now. If anything, rates could ease further as they did in some instances in the April and July renewals.”

O’Riordan stressed that this is important for Ecclesiastical, which specialises in heritage, charity, education, real estate and faith insurance. He added that a strong and stable panel of reinsurers working with it long term is central to its strategy.

“It is fundamental to what we do; we have a unique risk profile and we have developed long-term relationships to support us on that. We value those relationships with our panel who truly understand our business proposition.” he explained.

That said, while not seeking to disrupt his panel, O’Riordan would seek rate decreases if they were in line with market trends.

“The market is stable to edging in our favour,” he said. “But yes, if rate decreases were available, we would wish to benefit from those in the same way as the rest of the market, but in a sensible way as our relationships remain of paramount importance to us.”

Ongoing consolidation in the market is something that he is watching closely. AIG’s acquisition of Validus, AXA’s acquisition of XL this year, the more recent purchase of Aspen by Apollo and the acquisition of Nephila Capital by Markel have not gone unnoticed.

“We want to manage a well-diversified panel of reinsurers. Therefore, we have strict concentration limits. If various members of the panel were to merge to become one, this could become an issue and it is certainly something we are monitoring.” O’Riordan added.

“We want to ensure any consolidation does not breach the limits we set. There has been a lot of activity and we are keeping close eye on that. We don’t want to shrink our panel, and we continue to talk to reinsurers that are not currently on our panel so we can call on them if we need to.”

According to O’Riordan, the other big talking point at the Rendez-Vous could be the profitability review taking place at Lloyd’s and its implications for the market.

“We work with a number of syndicates so we will watch that with interest. Ultimately we want a stable and strong Lloyd’s market, so we believe this will be a healthy process,” he said.

Ecclesiastical is unique in the sense that it has a charitable purpose which is central to the business. It announced a further £5 million ($6.5 million) donation to good causes in its interim results in August, taking its total charitable donations to more than £100 million in the last five years.

“This is what drives our business,” O’Riordan added, “and is why taking a long-term sustainable approach targeting profitable growth is so important to us.

“We need our reinsurers to understand and support this approach so that we can continue to make these donations and meet our charitable purpose.”