Reinsurers should not be concerned about the capacity crunch in the property-cat market: Resolute Global Partners
The factors underpinning the capacity crunch in the property-catastrophe reinsurance market are easy to understand and can be explained by the basic economics of supply and demand. But reinsurers should not be concerned about the situation and should even press their advantage home.
That is the perspective of Glenn Clinton (pictured), managing director, property reinsurance, Resolute Global Partners, who argues that, after a very tough period for reinsurers, the pendulum has finally swung in their favour.
“We can now press this advantage,” he told Intelligent Insurer. “We’ve had five straight years of rate increases at 1/1, and I expect we will see more at renewal. Insurers have been taking rate for five straight years and much greater increases than we have enjoyed.
“They are flush with cash. There is no substitute for rate, and we must get more now while we can.”
Clinton stresses that the reasons for the supply-demand dynamic are easily explained.
Demand is being driven by the hard facts of increased cat activity. In the past decade to 2021, average annual cat losses have tripled to just under $50 billion from a $16 billion annual average in the 1990s.
“Be they hurricanes or wildfires, today every peril seems to have greater power and destructive force,” he says.
“Loss frequency and severity is increasing apace, and buyers are constantly being reminded of their need for more cat cover. Insurers and reinsurers are coming to grips with far greater loss potential in our rapidly changing world.
“And this leads to the question: ‘Is it even possible to provide reliable and meaningful coverage for events that happen with such breadth and frequency?’,” he asked.
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