Green shoots being seen for earnings protection products: Guy Carp

After a two-year hiatus, reinsurers are again warming to the idea of offering clients earnings protection-type products, Ed Hochberg, head of Global Risk Solutions, Guy Carpenter, told Monte Carlo Today.

Hochberg stressed that reinsurers remain very cautious but a “mutual empathy” between cedant and reinsurer is putting the possibility back on the table. 

“We are starting to see some green shoots,” he said. “The clients understand that things needed to change when they did, but reinsurers sympathise with the volatility clients are grappling with. 

“There are still differences between what clients would like to buy and what markets are prepared to sell, however.”

The market evaporated almost overnight in 2022/23 when attachment points were increased and reinsurers sought to limit their exposure to more high frequency events, including many secondary perils. 

Hochberg said this was due to the uncertainty created by an accumulation of small-to-medium-sized losses over several years. “Markets are prepared to look at this again. They want to take the time to understand the risk and they will want quality data. But they want to help,” he said.

“Volatility can come from sources other than cat alone.”

The solution will probably lie in what structures the market can develop, that can work for both parties, he added. “Plain vanilla structures can be counterintuitive to creating a deal that is mutually beneficial for both parties,” he said.

“The challenge is not only about understanding secondary perils better. It is more about taking a holistic approach that deals with any accumulation of losses. Volatility can come from sources other than cat alone,” Hochberg said. 

Commenting on the mood in Monte Carlo, he feels it is optimistic. “Some years the mood here can be subdued,” he said. “But people feel that demand and supply are up. The market is healthy.”

One cloud on the horizon this year has been US casualty. Hochberg said he understands this: “The problem with casualty is you never really know where you are in the cycle.

“The years 2020 to 2022 were worse than expected and the market fears another recalibration is needed. But it is a very nuanced space,” he concluded. 

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