There is enough resilience in the re/insurance industry to control the issue of inflation: Miller

Inflation is one of the hottest topics at Monte Carlo this year but Mike Papworth, managing director of Miller International, does not believe it’s here to stay.

He is approaching discussions at Monte Carlo from a facultative perspective, with a view to picking up the key themes and sentiment in the treaty market and addressing how facultative can help.

“A lot of the talk is around inflation and cat, and whether there’s going to be a cat crunch or a capacity shortage,” he said. “The other topic is that there’s still a lot of underlying volatility within insurance companies’ portfolios, not at balance sheet level, but at local P&L level.

“A lot of my time has been around dealing with low level volatility, how to smooth out those results, as well the bigger picture. If there’s going to be a cat issue, how are we going to deal with that?”

“Inflation is real, but it is also temporary. We’re jumping on this basis that inflation is going to be forever. In my view inflation is being driven now, essentially, because of Ukraine, and whether that is going to be a long-term issue or not.

“We have to be careful of not jumping ahead thinking the inflation is going to be double digit when projections are that it will drop.

“I personally see it as a blip. There’s quite a lot of rhetoric now that inflation is here to stay, but I really don’t see it.”

Papworth believes there is enough resilience to control the issue, especially once the situation with Ukraine—particularly gas prices—is resolved.

“There is enough energy to supply the world today, it just isn’t in the right places, so there’s a distribution issue that we have to sort out to avoid depending on Russia. But once we get that, which admittedly isn’t a quick solution, that will bring stability back to the energy prices and therefore bring inflation down,” he said.

“I’m very optimistic about our future and I think if we can adapt to the short-term blip of the inflation alongside the longer-term issues of global warming, our industry is pretty resilient and a good source of capital to cover what society needs—but we underplay our role in society.”

In his new role as managing director of Miller International, Papworth will take on responsibility for all businesses that are not London-based.

“Much of the role is no longer trading, so I have to build the team around me that can take over the relationships with the trading aspect,” he said. “It will also be about implementing the Miller vision.

“We are very clear that we don’t want to be one of the big brokers—in fact, quite the opposite. We will continue to be a moderately small company, and in that we will be doing specialty niche lines of business of which facultative has become on.

“We are the only facultative broker that is not aligned with a major broker, and our clients come to us because we’re independent. That will definitely continue,” he concluded.