Climate risk concerns after months of extreme weather and the macro threat posed by inflation have been the talk of Monte Carlo, with expectations for a hard market renewal for property reinsurance.

That is according to BMS Re’s North America president and CEO Chandler, in conversation with The Insurer TV as part of its #ReinsuranceMonth coverage at the Monte Carlo Rendez-Vous.

Supply of reinsurance capital is not going to keep up with demand, continuing the trend of recent hard market renewals, he said.

“Climate and inflation are the two themes that are most often spoken about in the foyers and in the ballrooms of the hotels. But with that clearly comes the cost of capital and the perception that there’s going to be a lack of property capacity come January 1,” said Chandler.

“We certainly experienced that in 6.1 and 7.1 and so when we weave all these component pieces together, it really looks like the demand for reinsurance capacity is going to exceed the supply of that capacity,” he continued.

This seller’s market puts pressure on brokers’ shoulders to find alternative forms of capital to help clients meet risk transfer goals in January, he noted.

Sharing his advice for clients, Chandler said: “Get started early and have great data.”

Brokers have the right tools to support cedants, particularly analytics, actuaries and models, but it is still up to clients to provide the data and to differentiate themselves.

“It really has become a data-driven industry, and it is of paramount importance that our clients have the ability to differentiate themselves and show what’s different and how they’re approaching their particular portfolio as different from everybody else.”

Brokers’ hunt for alternatives to traditional quota share reinsurance has also stepped up, Chandler suggested.

Pete Chandler, President and CEO of BMS Re, North America

“We really are looking for alternatives to quota share, especially in the property realm. It has become very tight regardless of if it’s property cat or just property-exposed business,” he said.

“Underwriters are definitely feeling constrained in their ability to allocate capital towards that line of business, and so we are looking at the capital markets for relief, surplus notes being probably top of the list are ones that we’re exploring to see if that’s a viable alternative for our clients this coming renewal season,” Chandler added.

He is also looking at a much more traditional alternative to quota share – facultative reinsurance.

“We are seeing a dramatic growth in demand for facultative,” he said. “Fac underwriters seem much more comfortable than the treaty underwriters right now.”

This can be an alternative route to accessing scarce capital, Chandler suggested.

“I do believe it’s true that the fac underwriters have access to different buckets of capital within their own organisations than the treaty underwriters do,” he said.

“They can be very discerning, they can pick and choose which class of business, which lines of business, and ultimately which individual insurers they choose to support.”

Pete-Chandler,-President-and-CEO-of-BMS-Re,-North-America-–-2

It is this belief in the important role of the fac market that convinced BMS to get involved in the past few years, he explained, viewing it as complementary to the treaty business.

“We’re thrilled that we’re in it,” said Chandler. “We see nothing but more growth in that space. Capital is precious right now and will take whatever bucket we can get it.”

Watch the full interview with BMS Re’s Pete Chandler, filmed from The Insurer TV’s pop-up studio suite in the Hôtel de Paris. Click for more on:

  • Fac market as alternative capital
  • What to expect at 1.1 renewals
  • Acquisitions in Mexico and Australia