It’s been another busy week of interviews with industry leaders at The ReInsurer as we tap into the important topics and events that are shaping market dynamics and expectations in the run up to the forthcoming 1.1 renewals.
This week we caught up Aon’s Catherine Mulligan who said the entire (re)insurance industry must work together if it is to increase the circa $1bn of theoretical capacity that currently exists in the cyber market.
Reinsurers have an increasing appetite for cyber business and have invested heavily in building teams, expertise and analytical capabilities in the sector.
According to Mulligan, alternative capital structures and ILS could increasingly play a role in the cyber sector. She noted that a number of collateralised reinsurance transactions have already taken place.
Keeping with ILS, GC Securities’ managing director Cory Anger, said the 144A catastrophe bond market will see new sponsors coming to the market as cedants try to manage the increased pricing in the traditional reinsurance and retro markets and the tightening of collateralized capacity on offer.
The cat bond market has already seen a surge in issuance during the first half of 2020, in part reflecting the high number of three and four year deals that have matured and are seeking renewal within the cat bond market.
However, that only tells part of the story. The collateralized reinsurance and retro market, Anger said, “is under stress” having been affected by the greatest magnitude of unexpected losses within the ILS sector and trapped capital. Investors have grown wary of unmodelled, unexpected losses that have been most apparent in the illiquid ILS strategies.
We also spoke with CCR Group’s Bertrand Labilloy who said despite the impact of the pandemic the group has been able to grow the reinsurance arm by almost 20 percent in 2020, benefitting from price hardening in the last renewals.
Labilloy specifically cited Japan and other markets where CCR Re “has pricing power”, for example, the MENA region.
“We’ve also been able to develop activity in new markets, for example in South Africa and some selected markets in South America,” he added.
Fitch Ratings’ Brian Schneider said the reinsurance industry should brace itself to cover half of the ultimate Covid-19 loss for the industry.
Speaking to The ReInsurer, Schneider said that while a lot of uncertainty looms over the actual outcome of this event, with a lot of the losses tied up in IBNR, the reinsurance sector will play a significant role.
Where Covid-19 is also adding further uncertainty is around reserving. Schneider believes the reserve redundancies are already exhausted for the industry at this point.
He said: “The recent accident years have turned deficient with the cycle really moving into the restoration phase so there’s really no more cookies in the cookie jars at this point.”
ABIR’s John Huff opined that Bermuda’s (re)insurers coped well with the shift to virtual working as the pandemic took hold amid important renewals, with capital raising now a focus ahead of anticipated opportunities from hardening rates.
Sticking with capital raising, James Morris from Barclays said, the hardening market conditions are driving a flurry of capital raising at Lloyd’s from scale-up, start-up and run-off deals.
“We are seeing an abundance of activity,” he said. “We probably have never been busier as a team supporting it. There is a lot going on in the scaleup space and we are supporting many syndicates there. There is the emergence of some start-ups, too, that are really exciting.”