Favourable market conditions to continue
The string of severe weather events in continental Europe and secondary perils, including hail and wildfire, will put further pressure on underwriting discipline, according to Dirk Herrenpoth, chief underwriting officer of NewRe.
He expects this pressure on underwriting discipline to continue, particularly taking macroeconomic factors, including higher inflation, into account.
Speaking with the Re/insurance Lounge, Intelligent Insurer’s digital hub for interviews, debates and panel discussions, Herrenpoth added: “We are coming out of an eternal soft market so, when we talk about the firming of rates, we are just talking about bringing them back to a sustainable level, in particular against the background of climate change.
“With a prospective view on risk, I think this has to be factored into the way we price our business and what kind of exposures we take on our balance sheet.”
Rather than a lack of capacity, Herrenpoth believes that the firming up of rates is being propelled by underwriting discipline.
He explained: “Generally speaking, we all know there is no lack of capacity. Even when we see rates firming, that’s very much driven by underwriting discipline and not a lack of capacity, with a few exceptions. I would not overemphasise the effect of new entrants into the market but it cannot be ignored either.”
“Without having capacity constraints, we are here to seize opportunities.” Dirk Herrenpoth, NewRe
The chief underwriting officer believes NewRe is very well positioned in this hardening market.
No big cleanup of the company’s portfolio has been necessary, said Herrenpoth, adding that, during the soft cycle, the company maintained underwriting discipline and kept results at a reasonable level.
“Without having capacity constraints, we are here to seize opportunities and to help clients with our capacity to execute their business strategies successfully,” he said.
“First and foremost, our clients can rely on us, that we are there to support them with our financial credibility and stability and our high quality business paper to help them to execute their business strategies.”
Turning towards the industry in general, Herrenpoth said he was deeply impressed by how quickly the industry changed from a “very personal face-to-face mode of working to a virtual way of negotiating”.
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The next renewals, says Herrenpoth, will be the second renewals to be mostly undertaken in a virtual way. However, he is confident that there won’t be any negative implications.
Herrenpoth went on to state that he doesn’t expect any tensions surrounding terms and conditions amid negotiations ahead of renewals.
“Last year, we had very intense discussions with clients on communicable disease exclusions. I think the market has found a way to deal with it,” he said.
“Clarity on wording is key, and both parties need to have an understanding what is covered and what is not. We will continue to strive for that.”
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