Finding the right balance

Welcome to the first of The Insurer’s daily editions from this year’s Singapore International Reinsurance Conference (SIRC).

This year’s event comes during what one senior reinsurance executive has described as a “delicate phase” for the sector, with reinsurers seeking to generate stronger returns while also maintaining their value proposition.

During this year’s run of international industry conferences, the question has been raised as to whether the upward shift in pricing and – perhaps more significantly – attachment points has diluted that value proposition.

Reinsurers operating in the Asia Pacific region face a similar challenge. More developed markets in the region, such as Japan and Australia, have seen increased reinsurance costs and higher retentions at recent renewals.

As Peak Re’s Jasmine Miow highlights in today’s edition, this challenge is more pronounced in other regional markets within Asia, where carriers operate with a more limited capital base and typically cede a greater share of risk to their reinsurers.

Several reinsurers have adopted the strategy of offering multi-year agreements for the lower layers of XoL programs amid a desire to cultivate long-term partnerships with carriers.

For these reinsurers, the challenge is finding the right balance between cultivating those relationships and supporting local carriers with the need to maintain discipline.

The need for the industry to demonstrate its continued relevance is one of the central themes of this year’s SIRC and will play a prominent role in discussions over the coming days.

The risk landscape is uncertain and volatile, with a rising global catastrophe bill, geopolitical tensions and macroeconomic challenges such as spiralling inflation and rising interest rates.

Against this backdrop, reinsurers will likely want to hold on to gains achieved at recent renewals. As Guy Carpenter’s Tony Gallagher suggests, the rate cycle may have peaked for most markets and a more stable renewal is expected this time around.

But challenges around lower layers will likely remain, particularly given the reliance on reinsurance of many carriers in the region. Should reinsurers retreat further from natural catastrophe risk, further questions will be asked about its relevance. To maintain its value proposition, reinsurance must at least be part of the solution.