The industry needs to work together to improve communicable disease exclusions resulting from Covid-19, according to BMS’s Pete Chandler, who also identified a robust increase in opportunities in the program administration space.

US coronavirus

Speaking on a panel discussion about program business reinsurance held by the Target Markets Program Administrators Association (TMPAA), BMS Re president and US CEO Chandler commented that communicable disease exclusions had become an issue for program administrators and carriers. 

“The industry is working feverishly to coalesce around a communicable disease exclusion they can agree upon,”’ Chandler said. 

“I look back at the June/July renewals and I think there were a minimum of eight different communicable disease exclusions that were floating around the market, and we need to work better together to bring that language to greater consistency.”

Another issue arising out of Covid-19 is insurers’ role in covering pandemics in the future. 

Moderating the discussion, Chris Pesce, who is national director of One80 Intermediaries and TMPAA president, commented “there is a race underway to come up with the solution for pandemic”. He asked the panel whether that kind of product would be more likely to be debuted through a program administrator (PA) or a carrier.

“There is probably room for both,” replied Edward Cruttenden, global head of casualty insurance at RenaissanceRe and active underwriter at RenaissanceRe Syndicate 1458.

“Having a PA there and syndicating the exposure across multiple balance sheets has appeal, both for the carriers in terms of they don’t have to take the whole risk and then try to find a reinsurance market necessarily or take the whole risk net.” 

Cruttenden noted that within Lloyds there is an innovation capacity allowance under which syndicates can write a certain amount above their stamp capacity for new types of risks, which he said could be attractive to certain syndicates. 

“So there are multiple parts to it and we are probably in the time of the market where generally the rating environment is up so the opportunity to take some pandemic risk is probably there within people’s balance sheets and appetites,” he said

However, Chandler was less bullish about the industry’s prospects of taking on pandemic risk.  

“I certainly believe that pandemic in the US does not get done without some type of public private partnership,” the BMS executive said.

“One of the beauties of our market is the ability to synthesise and analyse risk, but in this instance I struggle to see without some sort of public private partnership how the market can be asked to bear the entirety of this exposure.”

He added: “I hope there is a solution out there, I hope there is a product out there that gets brought to bear, but I don’t see it gets done without some type of government involvement. As much as that scares me to have the government involved in our business, I do think in this instance that is the right way to go.”

Chandler joined BMS in May 2019, having previously been deputy CEO of the US reinsurance broking arm of JLT Re, and has been growing the broker’s US capabilities.

Describing the market conditions, Chandler commented: “If we can agree that the definition of a true hard market is there is no capacity available at any price, maybe we haven’t seen that since the mid ‘80s. That was the last time there was a true hard market. 

“Now we are seeing that in certain lines. We are seeing some very bold headlines about where rates have to go especially on the front end. It is the dynamic of our industry where admitted versus non-admitted allows for different levels of expediency in the rate change environment.”

The executive said he is ”seeing a robust increase in the program administration space and the opportunities therein”. 

“There seems to be a lot of capital out in the world looking for a place to be deployed and insurance and reinsurance seems to be a pretty attractive home for that capital because the barriers to entry are pretty unique in that they are low,” he said. “So I don’t see a capital crunch but I do see a flight to quality.”

Lee Brenner, head of broker regional and national client market at Swiss Re, said his company is “busier than ever with program opportunities”, adding they are coming from “all over”.

“We are seeing de novo program business. We are seeing churn in programs from carrier A to carrier B. We are seeing a little bit of back to the future with some wholesalers trying to pull programs together to ease their world, and even a few retailers trying to pull programs together to ease their burden and make sure they have a ready market rather than having to go out to the market and pick carriers off one risk at a time.”