Biggest reinsurers may dominate cat after volatility
Recent volatility in the property-catastrophe market, combined with mixed financial results being reported by companies, has led to marked changes in the way that re/insurers view risks and changes to buying behaviours, AM Best has claimed.
Carlos Wong-Fupuy (pictured left), senior director, AM Best, told Intelligent Insurer that there has been a change in reinsurers’ appetite for property-catastrophe risks over the last few years due to volatile results and companies struggling to meet their cost of capital. This has resulted in many shifting their capital from property-catastrophe risks to casualty and specialty lines.
“Those who are committed to property-cat are moving to higher protection layers and trying to remove that volatility from their results,” said Wong-Fupuy. “We see capital deployment as being very, very cautious, and that is being compounded now with concerns over inflation.”
As a result, property rates have hardened. But, according to Wong-Fupuy, many reinsurers still believe these increases are insufficient or are uncomfortable with the levels of volatility in the business.
The picture is not completely one-dimensional, however. He added that some of the largest European global reinsurers, such as Munich Re, Swiss Re and Hannover Re, have taken a different approach. They see current market conditions as an opportunity and are comfortable taking more property-cat risk due to their wider diversification.
As a result, over the next three years or so, he thinks the property-cat market might become dominated by larger players able to absorb the volatility.
