All eyes on growth for Peak Re

In one respect at least, Piotr Nowakowski, chief underwriting officer at Peak Re, doesn’t expect climate change to be felt at Baden-Baden. The weather is, he says, invariably the same. 

“My first Baden-Baden was 29 years ago, and there has always been some rain,” he said. 

In other respects, however, the effects of increasing cat losses and fears of more to come will be apparent in the business being written. Peak Re, the global reinsurer founded in 2012, started restructuring its portfolio two years ago. 

That involved changes in the property portfolio, but also the motor business it reinsures. On the latter, particularly, it was not just the increased losses from big nat cat events but high-frequency losses that brought worries.

“There’s always talk about atmospheric events such as typhoons, hurricanes and cyclones, but the secondary perils such as hail and floods are more and more significant, with increasing costs,” Nowakowski said. 

“Writing many lines of business enhances the relationships and broadens our cooperation.”

Peak Re sought to reduce exposure to the frequency of nat cat events and boost its modelling capability. As well as licensing the full range of vendor models, the latter has included hiring a meteorologist, who works closely with the underwriting team, underlining that it’s not just a scientific endeavour.

“You can write a lot of papers and participate in conferences, but the main question is how to implement the findings in the real world of reinsurance,” said Nowakowski. “It’s about how to structure the portfolio, pick a property portfolio to face climate change and have a much more granular approach to all the perils it causes.”

Going for growth

Just two years on, that’s been a success. Today, according to Nowakowski, Peak Re has a “very sound, solid” portfolio, and that’s borne out in its recent results. In May, the company announced its best-ever net profit (of $200 million) for the full year of 2023. Its P&C combined ratio, from 110 percent in 2022, fell to 87 percent. 

“The firm is now looking towards growth—having seen a decline in reinsurance revenue in 2023 compared to the previous year—but its primary focus remains on its existing client base.

“For us, it’s very important to grow the businesses we already have because we believe we have the optimum portfolio,” Nowakowski explained. 

There are two other avenues for growth. One is new product lines: Peak Re intends to work with existing clients and brokers to see what areas it could cover that would suit its risk appetite and work well in the portfolio. That appeals to the business’s strategy, which seeks to promote a long-term view of its relationships, said Nowakowski. 

“Writing many lines of business enhances the relationships and broadens our cooperation.”

Finally, the reinsurer is open to new business—albeit while retaining its underwriting discipline. As Nowakowski put it, it seeks to be flexible within “red lines”. 

Looking to Europe

From these three areas of growth—existing business, new lines, and new business—Peak Re aims to deliver growth without impacting its performance. If handled correctly, this could increase the diversification Peak Re seeks across regions, product lines, and by client and sector. 

Geographically there’s scope for growth that reduces Peak Re’s exposure to extreme weather even further. The Hong Kong-headquartered business currently writes about 60 percent of business in Asia, a mix of P&C, 25 percent in the US (mostly casualty), and 15 percent in Europe. The last, particularly, offers scope for growth, according to Nowakowski. Initially, its efforts focused on Western Europe, but in the last six months or so it’s begun to increase its presence in Central and Eastern Europe. 

While that would help diversify some of the nat cat risk in Peak Re’s Asian portfolio, Nowakowski is under no illusions that it offers an escape from the impacts of climate change. Recent floods in Austria, Czechia, and Poland, as well as Germany, are a reminder of that, he said.

All of this means that underwriting remains disciplined and that renewals discussions will be as much about conditions as pricing. 

“We always see papers about reinsurance pricing, but it’s just one side of the business. The terms and conditions of the business are also vital,” Nowakowski said. Those will be a crucial part of the discussions at Baden-Baden and, even closer to January renewals, at the Singapore International Reinsurance Conference in Singapore next month. 

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