Reinsurers refocus but buyers want to dodge hikes

Reinsurers will be more “thoughtful” and “selective” in the deployment of their capacity at this renewal as they take stock of the heavy losses, and subsequent loss creep from 2017 and 2018 and realign their portfolios. However, cedants that have performed well should escape any severe adjustments.

That is the view of Mark O’Riordan, group reinsurance director at Ecclesiastical, which specialises in heritage, charity, education, real estate and faith insurance. O’Riordan is responsible for the insurer’s reinsurance programme, managing risks across the UK, Ireland, Canada and Australia.

O’Riordan acknowledges that rates are hardening in some parts of the market. He also acknowledges that some of the recent losses have especially hit the retrocessional market, also very reliant on ILS capacity, where rate increases seem almost inevitable. However, he heads into Monte Carlo hoping to dodge any such hikes.

“We know many reinsurers rely on retro but we hope to avoid any increases that have been passed on,” he said.

“There is a different feeling in the market this year after several years of losses, some unexpected events such as the US wildfires, the fallout from the Lloyd’s performance review and the uncertain global economic outlook. These factors have led to a refocus by reinsurers. They are being more selective in how they deploy capacity.

“That said, there have been no blanket changes in rates yet. Where the loss experience has been poor for reinsurers or the appetite of capacity for certain classes has waned, we are seeing adjustments.
Capacity is there, but at a price. But we hope to be shielded from those wider market forces.

“I see a situation where preferred pricing and capacity is made available for those clients where reinsurers feel there is a strong relationship across many lines of business.

“We are a specialist player with deep expertise in heritage and listed buildings and they buy into and support what we do,” O’Riordan commented. “Reinsurance remains fundamental to our business model as we also look to future-proof what we do by reviewing the rates we achieve and continuing to strive for profitable growth.”

Ecclesiastical’s combined ratio was a healthy 91.4 percent in the first half of 2019 but O’Riordan said the insurer is always looking to improve this.

While the company has no desire to change its panel of loyal reinsurers, O’Riordan notes that the insurer has always held talks with others keen to join its panel and it has a number of players “waiting in the wings” should they be required.

“The important thing is that we have had the right discussions in advance; we have options should we need them,” he said. “It is important that we maintain a broad and diversified panel that understand our business and our needs.”