Horsemen of apocalypse will end soft market

The current soft market will only be ended by a culmination of factors which could potentially manifest as up to three major market changing events, Paul McKeon, TransRe’s North American chief underwriting officer, told PCI Today.

He pointed out that the biggest loss the P/C industry had suffered wasn’t a hurricane or other natural catastrophe, but was instead the cumulative impact of several events during the soft casualty market of the late 1990s.

“There are three horses of our next apocalypse,” he said. “A large hurricane/earthquake/nuclear event, an interest rate increase that generates (un)realised capital losses, and the end/reverse of reserve releases. The longer none of them happens, the more likely they will all ride into town together. That will change our market.”

Asked if he could characterise 2016 so far in terms of the business he’s witnessed, McKeon replied: “There are moments of sanity and loads of head-scratching. We appreciate and respect best in class underwriters and we strive to support these players through the market cycle.”

He admitted that brokers have a particularly tough job in these market conditions and said he is often amazed at what they achieve for their clients.

“Brokers have to work harder to achieve orders for new or marginal players, but they get them done. Perhaps not with top tier security or talent—but at terms very similar to performing portfolios, which is sometimes astonishing. Many reinsurers don’t get all the looks, but when they do, they will find a way to support the deal.”

He added that one hot topic for the company which it is keeping a close eye on is that of big data, which has implications across many industries. It will be the smart players who engage and learn, he said.

“We have loads of data, over all classes, all territories, and multiple customers for 40 years,” McKeon pointed out. “But what we have will be dwarfed by the vast digital footprint being created every day. As risk protectors, our industry must sort the signal from the noise.”

He added that TransRe has recently hired a chief data analyst with a banking background to help the company do this.