European cedants deserve credit from reinsurers: Guy Carpenter

It is a broker’s job to advocate for European cedants and ensure they get credit for the work they have done in recent years, re-pricing and de-risking their portfolios, while also acknowledging that cat losses in Europe make up only a relatively small proportion of global losses.

That is the view of Julian Enoizi, chief executive of Guy Carpenter Europe, who told Baden-Baden Today that he believes that, although demand for reinsurance is rising, there may be more reinsurance capital than demand. It is the job of the broker to press the case of clients, which could result in some downwards pressure on rates on some layers.

“We are the advocate of the client. It is our job to make a market; to negotiate in that area around capital versus risk. Reinsurers want to grow, cedants want to buy more,” he said.

“It is our job to get reinsurers to distinguish between the $100 billion of cat losses globally, including the recent focus in the US on hurricanes Milton and Helene, and the fact that Europe has had only around $7 billion of losses to date in 2024. It is important that each cedant’s portfolio is reviewed on its own merits.”

Enoizi added that the adjustments many insurers in Europe have made to their portfolios in recent years should not be underestimated. They should make it a much more attractive place to deploy capital. “It is our job to explain the favourable adjustments insurers have been making to their portfolios to reinsurers. They have been significant,” he said.

As reinsurers look to put their capital to use, he expects a broader issue arising in this renewal: the role of reinsurers in how they support cedants. Since retention rates have increased, while reinsurers might be doing a good job protecting cedants’ capital and solvency, there needs to be a greater focus on supporting them on volatility, he believes.

“This issue must be addressed,” Enoizi said. “Some reinsurers may say that is not their role, that they are there to cover capital events, an essential role of the market.

“But insurers need to manage their volatility. If they are left to simply do it themselves, it reduces the role of the reinsurer.”

Renewal trends

On renewals negotiations, Enoizi suggests that where reinsurers want to deploy more capital only at the top end of structures, there could be downward pressure on rates. “Capital is scarcer at the lower end of structures and some of the extreme weather events in recent years in Europe, such as the recent floods, have made reinsurers wary of moving too far down structures, keeping retentions high and generally outside the zone of secondary perils,” he said.

He identified common ground for insurers and reinsurers: the great opportunity that is represented by the protection gap. Applied to cat events where, on average, only 30 percent of a typical loss is insured, or cyber risk, there is scope for insurers and reinsurers to seize an opportunity.

“Insurers and reinsurers want to grow. There is a vast opportunity called the protection gap. There is great scope for the industry to articulate its value proposition. There is an opportunity for billions of new premiums, as the industry contributes to greater societal resilience,” he explained.

The theme of reinsurers and insurers growing in partnership in Europe has been pervasive during the Baden-Baden meeting. Munich Re, the world’s biggest reinsurer, said in its annual press conference at the event that it anticipates demand for property reinsurance protection to continue to grow and it feels well-positioned to “meet this demand at appropriate terms and conditions”.

“Munich Re stands ready to deploy more capital in its European markets, wherever its clients demonstrate underwriting discipline in their primary market, with sound exposure management and achieving risk-adequate original rates,” Munich Re said.

“We continue to invest in outstanding risk knowledge and modelling expertise in order to provide that support to clients as the environment becomes ever more complex and volatile.”

Clarisse Kopff, member of Munich Re’s board of management, added: “Munich Re is ready to accommodate growing demand for reinsurance protection underpinned by proper risk-sharing mechanisms. We aim for ever deeper partnerships with our clients and for creating new ones.

“We put our financial strength and underwriting expertise at their service to enable mutual profitable growth.”

Hannover Re echoed this sentiment. “Going forward, as in the past, we see a wide range of opportunities to profitably grow our business together with our clients. I am convinced that we will achieve this by building on our proven strengths and continuing to evolve,” Thorsten Steinmann, a member of the E+S Rück executive board, Hannover Re’s German subsidiary, who is set to take over as CEO of E+S Rück starting January 1, 2025, said in that reinsurer’s press conference.

Cyber a big risk

Some risks could be too big for re/insurers to handle alone, however, and one of these is cyber risk. Enoizi believes an unexpected cyber loss will occur at some point, which will cause a reset in the market. He believes some form of public-private partnership or mutualisation is inevitable at some point—it is just a case of when.

“Similar to market-turning events of the past, it will lead to some form of government backstop. The only question with cyber is whether we manage to set something up in advance or wait for the loss to happen. Typically, it is the latter but ideally we would get ahead of the curve on this,” he said.

Having been in the role for just over 12 months, Enoizi noted three current areas of focus. The first will be driving the growth of Guy Carpenter’s facultative offering, following the news that Guy Carpenter’s and Marsh’s facultative business across Europe is set to merge, creating a single Carpenter Marsh Fac. “This is an exciting development that will mean an enhanced offering for clients,” he said.

The second is around the use of data to help clients to make better decisions. “We cede some $30 billion into the market; that is an enormous amount of data we can leverage,” he said. Finally, he wants to remain focused on the advisory part of the role. “We need to stay solution-focused,” he said.

Enoizi took the reins as CEO of Guy Carpenter Europe in September 2023. He joined Guy Carpenter in April 2022, serving as the global leader of its Public Sector Solutions practice. Prior to joining Guy Carpenter, he served as CEO of Pool Re, a position he took up in 2013. Previously, he held senior Europe-based roles at Chubb and AIG Europe, before becoming CEO of CNA Europe and later president & CEO of Argo International.

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