Mapfre Re mulls new realignment of retention levels as secondary perils bite

Mapfre Re may look to set different retention levels for primary versus secondary perils on its European book of business, as it looks to return to profitability in the region. It has been hit hard by many of the unexpected secondary perils in recent years and is seeking another adjustment to realign its portfolio with cedants.

That is what Mark Meyerhoff, chief regional officer, Europe, Mapfre Re, told Baden-Baden Today in the context of his approach to the year-end renewal for Europe. He said that the frequency and intensity of weather patterns in Europe have caught the market by surprise. While none has been a capital event, many have caused earnings events, which has affected the profitability of Mapfre Re’s catastrophe portfolio in Europe.

“We will express our opinion through the prices we quote.”

“Europe has struggled due to persistent cat losses. We are looking to respond to that, while also supporting our clients. We do not play only at the highest attachment points—we support our clients in more meaningful ways, across their entire programmes. But we do need to rectify the situation,” Meyerhoff said.

Part of the solution, he suggested, is to set different attachment points for primary and secondary perils. He said the reinsurer will be sounding out clients in Baden-Baden around what is acceptable.

“It depends on the country, the peril, the loss history of the client. There are many factors to consider,” he said. “We will see what requests are and what demand is like and respond. We will express our opinion through the prices we quote.”

Although retentions increased significantly in much of the market two years ago, it is worth remembering how low both they, and prices, have fallen in the soft market.

“A lot has changed but it has not been enough in some cases, given the severity of some of the perils we are seeing. In Europe, we need to fix the bottom line,” he added.

Cedants want more

This need for a further reset comes against a backdrop of increasing demand from cedants generally. Meyerhoff identifies two sources of demand. The first is from the larger, typically global, cedants which are seeking more support at the top end of programmes. This is driven by a mixture of loss inflation and changes to risk models.

While there will be capacity for this, he believes there could be some downward pressure on pricing at the top end of programmes.

“We will not see anyone withdraw capacity, and there will be more available at the top end.”

The second source of demand is from insurers looking for more volatility protection. “Insurers know what they are facing, and they want the support of their reinsurers. But I am less sure there is much of a market at the moment for these risks at the lower end of the spectrum,” he explained.

Meyerhoff thinks the European renewal will not be overly affected by recent hurricane losses in the US. The exception to this could be where European reinsurers have been hit hard but, broadly, he expects a stable renewal.

“Rates are acceptable. We will not see anyone withdraw capacity, and there will be more available at the top end,” he said.

Mapfre Re is eyeing growth on three fronts. The first is in the US where it wants to grow its cat book further—but without taking on exposure in the southeast hurricane-exposed states.

The second area is in Europe where it wants to diversify to write more casualty and life business—areas he says Mapfre Re is underrepresented in. In the life reinsurance side, it has reorganised its commercial and technical structure to better serve the market. Meyerhoff said it will be too late to write a lot of business in this year-end renewal, but he expects growth from 2025. Mapfre Re currently writes some €400 million of life business in Europe, roughly half its global life portfolio.

Its third key strategic move is in China, where it has secured approval from the China Banking and Insurance Regulatory Commission for the opening of a subsidiary office in Beijing. Until now, the Mapfre Re was present in mainland China through a representative office.

This new configuration will allow Mapfre Re to increase its business operations in China without changing the technical underwriting focus, a country in which it has been operating since the 1980s. The subsidiary will initially have an operating capital of 500 million yuan (€72.5 million) and will be led by Ignacio Rodríguez Arteche.

For more news from Baden-Baden Today, click here.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.