Major reinsurance firms are unimpressed with the way rates have responded to recent catastrophe loss years so far, but with another set of losses in Japan they hope for the frustrations to give way to more positive pricing momentum in 2020.
Speaking at S&P Global Ratings 2019 Bermuda Reinsurance Conference last week, a number of industry CEO’s explained that the way rates have responded to industry losses has disappointed them so far.
During a panel discussion, John Jenkins, CEO of SCOR Americas P&C Reinsurance, said, “We’ve seen a very slow, unsatisfactory acceleration of reinsurance pricing improvement, and terms and conditions. ‘Slog’ is the word I’d use.”
In particular, on property catastrophe reinsurance Jenkins explained that it, “just isn’t getting priced properly. This time we’ve been relying on primary rate increases,” where as in the past he said reinsurance has often led the way.
President and CEO of Odyssey Group, Brian Young, concurred, saying there has been “much more rate momentum” in primary insurance.
“The reinsurance pricing environment, in a word, has been frustrating,” he continued. “When it comes to cat I would have expected to see much more dramatic improvement,” adding that, “Commission levels also remain stubbornly high,” and “There’s just too much capacity in the market.”
On the question of the role of the insurance-linked securities (ILS) industry, Jenkins of SCOR Americas P&C Reinsurance commented, “Alternative capital is here to stay and we all need to learn how to work with it. I think what you’ll see is an ongoing evolution as they become more professional.”
Odyssey CEO Young said that his firm still encounters traditional players more than ILS, “I dare say that in the U.S., when we look at competition, we’re looking more at traditional players than nontraditional,” adding that “the traditional market has to take ownership over pricing.”
Kip Oberting, CEO of Sirius International Insurance, said that the recent typhoon loss activity in Japan could provide the stimulus needed to increase rates more substantially into 2020.
“I would say (Japanese renewals) are up only 50%, that’d be very disappointing; they should double,” Oberting said. Adding that, “Overall, we were not impressed with the price increases this year.”
Young of Odyseey agreed, predicting, “I fully expect that we will see significant change next year in favor of reinsurers.”