Everest Re can push on property cat market for margin gain

Everest Re intends to push on the property cat reinsurance market hard enough to get a notable uplift in margins without increasing overall exposure, company officials have indicated.

“Our goal is to expand risk-adjusted returns,” CEO Juan Carlos Andrade (Pictured) told his company’s Q3 earnings call. “And that's really the significant opportunity that we see in front of us.”

“With the current pricing, the current terms, we think we can grow the top line without necessarily growing the exposure,” Andrade said.

Everest Re’s strategy to diversify and re-underwrite towards reduced earnings volatility “is still very much in place,” but Everest Re sees “the nuances of this market, which will allow us to make those trades where we think we can expand margins.”

Margin expansion on property cat is a question of “hardening our portfolio from a limits, structure, rates and term standpoint” first as soft market structures fall away, grabbing added rate second, and “prudently grow[ing] with core cedes” third, officials indicated.

That could leave Everest Re still shifting away from the wrong structures. Several years of rate gains have still nonetheless left the market “still [] living, for the most part, with soft market terms, conditions and contracts,” said Everest Re’s head of reinsurance James Williamson.

“I think you'll see us continue to trade away from some of the areas of the market, which really makes us susceptible to climate change, things like aggregate programmes, cat exposed pro rata, some of the peak risk that comes along with the retro book,” Williamson said.

Williamson falls in line with the margin over growth mantra. He calls current conditions “a fantastic market opportunity” but concurs “we're not going to have to stretch our total risk load.”

Everest Re claims its portfolio shifts to date have reduced cat exposure and left a "more durable, resilient portfolio" that proved itself during Hurricane Ian, which for Everest was an earnings event at less than 1% of estimated reinsurance industry loss.

Everest Re sunk to a $319 million net loss in the third quarter on the weight of natural catastrophe. In reinsurance, the combined ratio rose to 115% on $620 million in cat losses net of recoveries and reinstatement premiums.  Hurricane Ian topped off a quarter including European hail storms, Hurricane Fiona and Typhoon Nanmadol.

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