Buyers seek extra protection after scare
Some insurers are looking to strengthen their reinsurance programmes in the aftermath of hurricanes Irma and Harvey as they fear being underexposed with so much of the hurricane season still to run.
Alexander Craggs, head of reinsurance at Antares Managing Agency, said he had seen several types of activity from buyers in the last couple of weeks. There were a couple of so-called ‘live cat’ opportunities late last week from buyers looking to expand their programmes vertically when it looked as though Hurricane Irma could hit Miami as a Category 5. He was not sure whether they were placed.
He had also seen buyers seek more horizontal coverage in the past week as insurers look to ensure their programmes can cope if there is a third, fourth or fifth such event this hurricane season, one such deal he participated in.
In addition to this quick coverage being sought, Craggs believes some buyers will look to tweak their programmes for the January 1 renewals, although they will now be doing so against a backdrop of potentially hardened rates, especially in loss-affected zones.
“The problem they may have is that a lot of budgets have already been set for the renewal, so they are going to have to be clever,” he said.
“In that situation, you might see buyers increase their retention and use that saving to buy more at the top of their programmes, where you can buy more for the same money.”
Richard Anson, head of ceded reinsurance, Antares Managing Agency, added that the recent storms will aid buyers make a business case for buying more coverage.
“Cat losses had been benign for some time and this was a reminder that a $100 billion loss can occur,” he said. “Buyers know the risks but it reminds senior management in insurers about the importance of reinsurance.”
Anson said that in terms of his own programme, he was expecting a stable renewal although he admitted the hurricane losses could put upward pressure on rates in some areas. Antares has restructured its programme in recent years to use more composite, multi-class covers. This also meant some changes in reinsurers, as not all want to write such business, but the programme is settled again now.
On the underwriting side, Craggs said, he is also seeking a fairly stable renewal in which it supports existing clients and maintains the balance it has achieved in the portfolio in recent years. He said he expects at least a stabilisation in pricing and maybe some upwards pressure, and he is willing to support existing clients with extra capacity if they are seeking to strengthen their programmes.
He added that the company has started writing more composite business in recent years, for which there is a growing demand from cedants looking to rationalise their programmes in the same way that Antares has done in recent years.
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