Greenlight to benefit from market turn

The hurricanes that have made landfall in the US will have “scared the living daylights” out of some market participants as much because of their potential scale rather than the actual losses. But that could lead to third party investors being more selective about which carriers they work with in future.

That is the view of Brendan Barry, chief underwriting officer, Greenlight Capital Re, who told Monte Carlo Today that the reinsurer stands to benefit from an improvement in pricing in the industry generally as it has little exposure to catastrophe risks in Florida where the majority of losses are likely to occur.

Barry said that while he does not believe capital markets investors will flee in the wake of losses, some could become more discerning as to who they work with.

“I do not believe big losses will send investors running. When you look at the size of some pension funds, a $50 billion loss is just a bad morning to some areas of the capital markets. In contrast, this could be a meaningful event for reinsurers.

“But it may serve to separate the good operators from the bad on the underwriting side and investors may become more selective about which carriers they work with,” he said.

After some tough years for the Cayman-based reinsurer, formed in 2004, Barry said the company is back on track now thanks to changes it has made to the portfolio in recent years, starting in 2012, which resolved some unprofitable lines it wrote in 2009/2010. It put a poorly performing commercial automobile book into run-off and exited a book of construction defect contracts for which it bought a loss portfolio transfer to cover any future claims in 2016.

On the back of these changes, Barry said, the portfolio has been steadily improving and he expects the book’s overall combined ratio to be close to the mid-90s this year. It has refocused on its core lines, which include non-standard auto, accident and health, financial lines, medical stop loss and a limited amount of cat business.

He believes the company has a stable and loyal client base. He said the company has formed deep relationships with many of its clients where it will supply capital to them in the form of equity or debt investments as well as through more traditional reinsurance support.

“We are not that big and we are not in every corner of the market. But that is by design,” he said. “We have a good set of clients and we participate in their capital structures in some instances in a number of different ways. We also offer support around things such as data analytics. A lot of reinsurers only think inside the box but we are agnostic about how we supply capital to our clients and we form very good relationships as a result.”

Coming back to a potential change in market conditions, Barry believes the reinsurer is well placed now to benefit.

“We have kept our tinder dry from losses. We do not anticipate a big change in the market but we do think that losses will highlight the lack of profits in the industry and there will be a change for the better as a result.”

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