Speaking to The Insurer TV, Slabbert said that the property market faced a “conundrum” as while insurers were continuing to push for rate increases on what it deems is underpriced business, many buyers can not afford rate increases.
“In general the expectation is that the natural catastrophe rates are about 10-15 percent underpriced,” Slabbert said.
“That makes it challenging because the consumers of these products can’t necessarily afford to pay that, even though we’ve seen rates come up,” he added.
Slabbert said the challenges surrounding affordability of property insurance were particularly pronounced for homeowners on the US Eastern seaboard, where he said there’s the biggest aggregate of exposures which “typically all get hit at the same time”.
He noted that buyers are increasingly becoming more sophisticated, and will no longer pay for other people’s losses.
“So it’s not that easy to balance out an Eastern seaboard risk with a rural area somewhere else in the US,” he explained.
Slabbert said that one potential resolution could be a governmental discussion on the role it can play in tackling the affordability of insurance.
“I think there’s a role to be played by the government to determine how they can participate and formalise their participation that will ensure that it’s an affordable product going forward,” he said.
“As I say it does become challenging for the buyers,” Slabbert said.
Slabbert explained that MS AUL – in conjunction with its sister companies Amlin AG (MS Amlin) and MS Amlin Insurance SE (MS AISE), as well as its parent company Mitsui Sumitomo Insurance (MSI – see image for company legal structure), had been increasingly taking a group approach to risk selection.
Catastrophe losses contributed 9 percent to Syndicate 2001’s loss ratio last year compared to 7 percent in 2020.
“For us it’s not just about the Syndicate, clearly we have other balance sheets in terms of our reinsurance company but also the holding company,” Slabbert said.
“So in conjunction with MSI, we’ve been considering where the right place is to participate on programs,” he added.
The executive – who took over the helm from Tom Clementi in October 2020 – said MS Amlin had historically been overweight in North American catastrophe exposures and outlined the steps that had been taken to address this.
Slabbert explained that MS Amlin had reduced its participation in North America and moved towards territories where “it’s not so cat prone”. He added that the carrier has also moved towards some international territories “where rates are still very much adequate”.
“We’ve purposely moved away from the Eastern seaboard where the frequency and severity has been much higher in the last few years,” he said.
Watch the full video interview on The Insurer TV to hear more from Slabbert on Syndicate 2001’s return to profit in 2021, MS Amlin’s recent split-RITC with RiverStone and the carrier’s future ambitions at Lloyd’s…