Everest: reinsurer pricing power will run well past mere rate adequacy

Everest Insurance will push for ever more property reinsurance rate at least through the January 2024 renewals as all conditions remain firmly in place to keep the market hardening well past the rate adequacy already achieved, top officials have declared.

“We don't see a change in the market and therefore we are going to continue to push rate, terms and structure,” CEO Juan Andrade (pictured) said.

The supply-demand gap on the market has not changed, Andrade believes, with a “meaningful gap” still palpable as pent-up demand from cedents grows apace while nothing new arrives on the capacity side, he said.

On the supply side, Andrade sees “no capital formation of any meaningful extent” and has heard of nothing in the pipeline that could change the arithmetic. The demand side is “pent up and growing rapidly”.

Everest expects further fuel from a rebounding flight to quality after some cedents were forced into business with reinsurers which “frankly, I think they’d rather not be trading with,” Andrade said. “We'll have an opportunity to help our clients clean up those panels.”

Ultimately, underwriters simply aren’t made to give back the price, Andrade claimed. “I haven’t met anybody in this industry who, because they have some additional capital coming in at 1/1, wants to trade down or auction down pricing in property,” the CEO said of underwriters licking wounds from several years of losses. “That is not the mentality that exists in this industry.”

The upshot is not only the “excellent prospective returns” seen at mid-years and forecast for the January 1, 2024 renewal, but a readiness to ignore the achievement of mere rate adequacy as long and as far as pricing power holds.

“The fact is, whether we like it or not, we live in a cyclical industry,” the group’s head of reinsurance, Jim Williamson, said.

“Prospective return profiles are excellent; but that doesn’t mean we are going to sit there and accept that,” Williamson said. “We are going to continue to push.”

Comments from Everest followed hot on the heels of word from rival RenaissanceRe that property rates had hit the adequacy threshold across the industry.

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