Market will discover discipline as results show the pain

The market will likely show more discipline in the forthcoming renewals as reinsurers feel the pain of series of catastrophe losses this year, which have hit the half-year results of many, Nick Orton, underwriter, international, Hiscox Re, told Baden-Baden Today.

He said that losses including the Canadian wildfires, European flood and hail, Japanese quake, Taiwan quake, Ecuador quake and Chinese flood had combined with reduced reserve releases and a poor investment environment to hit half-year results.

“We therefore expect the market to show more discipline than it has over the past few renewals and have expectations of pricing coming in risk-adjusted flat for non-loss affected programs,” Orton said.

He said that Hiscox Re has actively adapted its strategy over the past few years in response to market trends with the end goal of remaining relevant to its clients throughout the cycle.

“In order to navigate the softening market trends on vanilla cat programmes while maintaining our underwriting discipline, we have focused on the client, asking what we can do to help them, where they see problems with their businesses and then co-developing reinsurance solutions—be that specialty reinsurance solutions or alternative structured products for property portfolios.”

He added that the company now has a much more diversified reinsurance portfolio, down from 85 percent property to 65 percent in just a few years.

“This has been a combination of underwriting the cycle in the property book, reducing where margins are no longer there, and the growth of niche, specialty and casualty lines of business,” Orton explained.

He said the company has also diversified its capital base with the development of Hiscox Re Insurance Linked Strategies, which now has over $1 billion of assets under management and is continuing to expand its product range.

He added that while the UK’s decision to leave the EU has resulted in uncertainty, Hiscox has the structure to cope, especially given its Bermuda domicile.

“We have the luxury of a Solvency II-equivalent regulatory domicile in Bermuda, an established Lloyd’s business with global licences in re/insurance, a UK incorporated insurance company and if required, the plans in place to set up a new EU-based insurance company to support our current and future European business.

“While the regulatory future is uncertain, our group structure should allow us the flexibility to respond quickly to any changes in that landscape, and in the meantime we will continue to work hard for our clients and business partners,” he said.