Navigating the post-HIMM pricing structure: XL Catlin

Rates were at unsustainable levels before hurricanes Harvey, Irma and Maria and the Mexican earthquakes (HIMM) hit in September.

Following the catastrophes, risks should be more adequately priced, according to April McLaughlin, head of reinsurance for Latin America at XL Catlin, speaking to Intelligent Insurer.

“As cedants begin considering the appropriateness of their reinsurance structures post-HIMM, we will be there to help them navigate the process and provide solutions,” she said.

McLaughlin added that reinsurers have to charge adequately for exposures to be able to pay for attritional losses as well as large and catastrophic events when they occur.

She added: “If we are able to charge adequate prices, we can avoid drastic rate movements and manage volatility.”

Latin America, while considered by many as an area of geographical diversification, is also a region that can face large losses. Because of this, underwriters need to be acutely aware of their exposures, said McLaughlin.

She added that Latin America is very dependent on proportional capacity, which means “reinsurers delegate a lot of trust to their cedants”.

“Having mutual trust with key partners is vital,” she added, explaining that XL Catlin looks at its cedants as strategic partners.

She believes that cedants at the conference will want to discuss the impact of recent cat losses on reinsurers.

“How much will reinsurance rates increase in Latin America? However, the conversations should also provoke cedants to re-evaluate how much catastrophe limit they buy,” added McLaughlin.

The cat losses in the region also emphasise the “disparity” between the economic loss and the insured loss, challenging the industry to develop innovative solutions to close the protection gap.

“As an industry, we need to continue to raise the level of awareness among the general population,” she said.

McLaughlin believes that the industry also needs to engage with governments to develop insurance solutions, citing Mexico’s Fonden and the Caribbean Catastrophe Risk Insurance Facility as successful examples.

“We have a long way to go but the industry as a whole can to work together to shrink the gap.”

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