Insurers will seek to pass on rate hikes
The implications of retro and reinsurance rates moving from a soft to a hard market and how fast such increases could be reflected by cedants in their own tariffs on a direct basis will be the main talking point at SIRC this year, according to Laurent Montador, deputy CEO of CCR Re.
Montador told SIRC Today that recent losses will put pressure on rates as reinsurers seek to ensure their business model remains sustainable.
“All the recent cat events, not only in Caribbean but also earthquakes and wildfires, have hit cat heavily but also other lines of business like the marine sector, even in its storage component. These losses will come as an extra argument for the necessity of rates increases or other cover shapes to make reinsurance a sustainable tool for clients,” he said.
He added that while the issue of overcapacity will also be a talking point, he believes that reinsurance is starting to lose its allure for capital market investors for whom the risk versus return ratio has proved insufficient.
“Reinsurance is no longer a new land of opportunity as the risk assessment has clearly proved to them to be far insufficient. Furthermore, the full belief in modelling tools is changing with an adaptive position about what ‘return period’ really means in a climate change environment with great uncertainty,” he said.
The dynamics around the renewals in Asia will be similar to other parts of the world in the sense that reinsurance is a global business and the losses in the US will affect global players to an extent that is not fully known for the moment.
“Clearly, 2017 will represent a capital loss for the industry and it must also reconsider its way of doing things with an emphasis to loyalty and long-term commitment. That's one of our values under our new brand CCR Re.
“We also consider a technical approach a necessity and a guarantee for our clients that we will understand the losses when they come if we understand the original business underwritten,” Montador said.
In terms of CCR Re’s strategy in Asia, Montador does not anticipate any sudden reaction or retraction based on what has happened.
“We approach not a market but companies with which we understand the business, the long-term relationship philosophy. We are backed by a board of directors who also know the rules of the insurance and reinsurance sector and our global risk framework.
“Accumulation controls are key in our business but we do see opportunities in the cat, agricultural or credit sectors. We also foresee potential growth in life business. Our target will be stability of our geographical scope, but we shall stay attentive to opportunities in new markets for these lines of business as well.”
One of the other big talking points at SIRC has been regulatory changes. Montador welcomes these as they often help to increase transparency of the risk—although he also warned against regulations that hinder reinsurers in the region.
“This will improve the strength of direct companies and maybe with future M&A activity. But it is important not to transform this regulatory framework into barriers to reinsurance players as reinsurance is a worldwide business that needs naturally stable and free access to international rules,” he said.
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