Certain lines must push back on rates
The marine, energy and aviation markets have allowed themselves to slip into low single-digit return on equities, and must push back on rates to return to double digits, Adrian Poxon, executive vice president and head of global specialty reinsurance at Sompo International, told Baden-Baden Today.
Poxon believes every line is challenged—even property has been in a “dire” position for many years—and that the market has become used to reducing the cost of their insurance.
He suggested this is exacerbated by the losses from Harvey, Irma and Maria, and the market is now in a much more powerful position to push back on rates and push terms and conditions.
“We need to do that,” Poxon said. “Even without the storms, we were still looking at the overall results and finding that the rate inadequacy of the whole portfolio was such that we weren’t actually making money for our shareholders.
“We can’t carry on like that. We’re not here to lose money for our shareholders, we’re here to make a profit.”
Even before the storms, Poxon suggested, most players were in a situation in marine, energy and aviation where they knew they couldn’t carry on what they were doing.
“The premium adequacy has reduced; it’s not significant enough to pay for the attrition that’s out there—never mind the large losses or the storms. You’re going have to get tough with people.”
Aviation is probably more challenged than many other lines of business, said Poxon, with a deficit that has been growing over the last four years and many insurance facilities disappearing.
“You no longer need to have a subscription market in marine hull, cargo, and aviation,” said Poxon.
“These are areas where the requirement for capacity on the physical damage side is not very large, but you have top values in those areas, even on marine hull where you have cruise ships worth in excess of $1 billion.”
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