Losses in 2017/18 create a ‘different feeling’ for insurers as they watch for retro fallout: Eccelesiatical

The re/insurance losses seen in 2017 and 2018 have given the market “a different feeling” this year, said Mark O’Riordan, group reinsurance director at Ecclesiastical.

“Some of these losses were unexpected, such as the Californian wildfire activity and the subsequent loss creep from Typhoon Jebi. To some extent this has now been compounded in 2019 by the losses from Hurricane Dorian, Typhoon Faxai and most recently Typhoon Hagibis,” he said.

O’Riordan explained that these losses, coupled with the continuing actions resulting from the Lloyd’s performance review and the uncertain global economic outlook, have led reinsurers to be more selective of where they deploy capacity and, crucially, at what cost.

“There is certainly an acknowledgment that rates are moving in some areas and we wait to see what impact this will have on retrocession costs, which could potentially feed through into increased reinsurance cost for insurers.”

But, he said, there doesn’t appear to be any marketside pricing increase and capacity continues to be plentiful. Where loss experience has been poor or appetite for a particular class has waned there have been, and will continue to be, upward corrections in pricing.

“For those that have performed well, we would expect to avoid any upward pressure on rates. I expect we will see a more selective approach from reinsurers one where they will focus on key clients with whom they have significant and long-standing relationships across different classes of business and in different territories,” O’Riordan said.

“As a specialist insurer reinsurance is fundamental to our overall strategy and we continue to build and maintain long-term relationships with our reinsurance partners to ensure they buy into our approach and our overall aims as an organisation.

“As such, we do not expect any major change in appetite or attitude from our partners as we move through this phase of the market.”