Everest’s approach to growth and pricing will be ‘regionally nuanced’

Complex market dynamics in different parts of the world mean the growth plans of Everest Re must be varied by region, as it looks to expand in specialty lines such as engineering, marine, accident and health (A&H), and trade credit, said Artur Klinger, head of international reinsurance for Everest.

Speaking to Monte Carlo Today at the Rendez-Vous De Septembre 2024, Klinger said that looking ahead, Everest’s approach to market growth and pricing will be “regionally nuanced”.

Overall, Klinger expects disciplined market conditions to prevail, especially in property and specialty lines. However, he noted that different regions will experience varied market dynamics. For instance, catastrophe-prone areas are likely to see continued upward pressure on pricing due to the growing frequency of events such as floods and hailstorms.

“In some regions, particularly those affected by cat losses, we will need price increases, while in others, we might see slight erosions,” he explained. “Overall, we believe the average pricing level will increase, driven by these problematic areas, but the adjustments will be very region-specific.” 

This nuance extends to liability lines, where Everest is witnessing “complex inflation patterns”.

“On the liability side, inflation also has regional aspects. In the US, for example, social inflation and litigation funding are significant concerns, leading us to reduce exposure. But outside the US, particularly in Europe and emerging markets in Asia, we see opportunities in casualty lines.”

Demand on the up

Despite these challenges, Everest is viewing considerable opportunities ahead. The increasing risk environment is driving demand for reinsurance products, and Everest is well-positioned to capitalise on this trend.

“There is increasing demand due to the heightened risk environment, and we are responding with innovative solutions that meet the specific needs of our clients,” Klinger said. 

“We are investing in offering our clients strategic, tailor-made solutions and specialty products to meet the growing demand,” he added. Reinsurance, particularly excess reinsurance, is becoming a vital tool for clients facing increased risks from climate change and geopolitical tensions.

One area of significant growth potential is in specialty lines, Klinger said, such as engineering, marine, A&H, and trade credit. Everest’s focus is on expanding its expertise in these areas to offer more comprehensive solutions to its global clients.

“We’ve grown nicely in recent years and have built a well-diversified book. Now we’re focusing on offering more services and specialty line expertise across the globe,” he said.

Klinger noted that Everest’s strategic objective is to create a robust, diversified business in years to come. “We are focused on building a business that will last for the next 10 to 20 years. The key to our success will be maintaining our discipline, adapting to regional differences, and continuing to offer innovative, client-centred solutions,” he said.

The global reinsurance market is facing several significant challenges that are shaping its development. Klinger said the first major hurdle is geopolitical fragmentation, which is causing widespread supply chain disruptions. 

“More than 60 percent of clients have reported disruptions in supply chains, which will have a significant impact on the economy and, consequently, on insurance,” he stated. These disruptions are inflating costs and increasing exposure to operational risks, making insurance coverage more important. 

The second significant challenge relates to climate change, which is exacerbating the frequency and severity of natural disasters. “We’ve already seen several flood losses exceeding $1 billion this year, and flood and hail remain major issues,” Klinger said, highlighting the need for the industry to adjust its risk pricing and coverage models to address these climate-induced losses effectively. 

The third challenge revolves around the quality of capital within the industry. “Everest is well-positioned in this respect,” he said, due to its straightforward capital structure.

“Everest has a simple structure with no legacy issues and no complex life insurance past. This positions us well to help our clients navigate this challenging environment.”

Heading into renewals, Klinger expects “good discussions around technical issues, around modelling” with some pressure on commission and rate increases in certain areas. 

“In casualty there might be some areas where we still have discussions on commissions, and areas in the international nat cat space where we need significant rate increases,” he concluded.

For more news from the Rendez-Vous de Septembre (RVS) click here.

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