Simon Hedley, president of Beach and CEO of Beach North America, an Acrisure Company, on how a blend of strong analytical and broking skills will help clients “find a way” during challenging times
The reinsurers’ appetite range is getting wider as we move into next year which will have an impact on US reinsurance buyers as we move through 1 January renewals and into 2021. There is reinsurer discipline across the board, but we are seeing a divergence of those reinsurers wishing to deploy more capacity in a fast improving ‘risks attaching’ pricing environment. This is versus those taking a more cautious approach due mainly to a heightened expectation of continued volatility, coupled with a feeling on rate of ‘is it enough?’
There is clearly a hardening rating environment in most major lines of business, which is driving down loss ratio picks, even with increased loss trend and lack of yield factored in. However, many reinsurers remain very cautious as they deal with ongoing Covid exposures with further casualty loss development from recent underwriting years and another year of property cat frequency, affecting cedants proportionately more than reinsurers. That being said, in ‘hard markets’ there is always a lot going on and a mix of signals, and history shows that there are always pronounced winners and losers that emerge.
As reinsurers and insurers alike deal with increased volatility and adjust to a near zero-interest-rate environment and improved pricing, a highly focussed broker who understands the client’s objectives and, especially, the sometimes fast moving individual reinsurer appetite, will help cedants navigate towards the best outcome.
Another major dynamic of 2021 is the change under way in the reinsurance broking marketplace. Consolidation is far from new in broking, but Aon taking over Willis is a seismic move. It creates a conglomerate duology which is not necessarily good for customers. However, a group of new and growing ‘specialist’ reinsurance brokers has emerged in recent years, which Beach is part of.
This group of brokers provides reinsurance buyers with attractive alternatives and often co-broking arrangements with soon to be one of two conglomerates. I would say this is a positive for sophisticated buyers as diversification of market access and fresh ideas is crucial to success.
All of that adds up to a greater need for thoughtful, technical reinsurance buying that balances each cedant’s risk appetite and capital characteristics with reinsurers that have appetite and can add value.
A one one-size-fits-all, industrial approach to structure and placement won’t work in the changing environment. Insurers will achieve the best results only through a series of extremely astute and personalised consultations with a broker who knows the reinsurers and their metrics well, and has the analytical and broking skills ‘to find a way’.
Strong analytics capability and market knowledge underpins everything. Every area of reinsurance demands it. Analytics inform program structuring to create reinsurance protections that meet cedants’ particular objectives by ideally matching portfolios with reinsurers. Sophisticated reinsurance intermediaries must provide market insight alongside risk expertise and capital advice.
For us focus is key. Two of our main specialities are casualty treaty and US regional/specialty property treaty. We know intimately the appetites and pressure points of all the credible reinsurance carriers active in this space. That allows us to match risk and capital with informed finesse that helps buyer and seller alike to succeed in the face of change.
As a key strategic part of Acrisure, the large and fast expanding retail broker, we are broadening our reinsurance focus to other parts of the market and globe, but only where we can differentiate ourselves in terms of technical understanding and deep market knowledge. We are also working with our parent company to transform trading relationships in terms of technology supported processes and access to the most efficient risk bearing capital.
We are a welcoming home for reinsurance brokers looking to make a difference!