The market is in a healthier place
Nick Orton, head of international at Hiscox Re & ILS, gives his view on the state of the international property reinsurance market in 2023.
As we come out of the third quarter, what have been your main takeaways so far from the international property reinsurance market in 2023?
Firstly, the market is in a healthier place than it has been for quite some time. We are coming out of an extended period of imbalance during which rates were simply not adequate for the risks reinsurers were underwriting. That is beginning to change now.
Secondly, reinsurance remains a relationship-driven business. We recognise that this hard market has not been easy for our clients. In this industry, people often talk about the importance of relationships. We saw 2023 as an opportunity to ‘walk the walk’. It’s good to be there when things are going well, but we are proud to be a long-term partner, supporting our clients through challenging times.
Finally, we see no change in the factors that drove the creation of this market cycle. Notably, climate change, heightened catastrophe activity, inflation and geopolitical uncertainty. Also, we haven’t yet seen any great wall of capital ready to step in. So, we expect the hard market to continue into 2024.
Are you seeing signs that hard market conditions are alleviating in some areas – to what extent is this happening in the international property reinsurance market?
We have not really seen it alleviating. It is the first time in my career that I’ve seen all classes of business moving upwards simultaneously. The primary change we have seen recently however, has been a market consensus on terms and conditions. That is a sign of the market sorting itself out, resulting in smoother renewals as we moved through 2023.
This year has seen a significant amount of extreme weather events impact parts of the property cat market, with some carriers even exiting the space. To what extent are you and your team having to change the way you work?
The market is having to adapt. There is no denying climate change is having an impact on the frequency and severity of catastrophes. Just look at the recent European wildfires, one of 11 billion-dollar-plus losses the market has had to date this year. It’s something we need to continue studying in partnership with our research and analytics team as we work to stay ahead of changes in the underlying risk environment.
For us, it’s about combining technical underwriting and cutting-edge research to meet evolving risks. We have been doing this for a long time now, and responding to emerging risks is part of our DNA. Hiscox is an established brand founded in 1901, and we have been writing reinsurance for 50 years now. We plan to be writing reinsurance for another 50 years, which means building sustainable partnerships with clients and understanding what the risk environment will look like over that time.
For the rest of 2023 and into 2024, what do you see as the biggest challenges and opportunities in the international property reinsurance market?
Climate change is here and now. It’s the biggest challenge we all face. And it is not just the increasing natural hazards, but also the compounding impact of populations expanding, both increasing values and moving values into higher-risk areas such as floodplains and near forests.
The opportunity comes from partnerships – we look forward to continuing to build our partnerships in 2024 and beyond.