Positive on property: Everest Re sees market discipline holding

Everest Re expects favourable market conditions in property with opportunity still knocking around the globe and a supply-demand balance in the market that could very easily deliver Everest Re’s hoped-for returns.

That’s the bullish mood Sharry Tibbitt, Everest Re’s deputy chief underwriting officer and global head of property reinsurance, brings to talks with a broad range of cedants at the APCIA conference underway in the windy city this week.

“We are still seeing very good opportunity,” Tibbitt told APCIA Today. 

“Retentions are going to stay where they are.”

By January 2, headlines are likely to show the market sufficiently tight to hold the line on newly achieved gains from the 2023 market reset, including both rate and the heightened retentions, Tibbitt forecasts.

“I don’t see US property rates dropping to any degree,” she said of her own forecasts. And the market’s much higher retentions can’t come back down because cedants can’t afford to buy them back down.

“Retentions are going to stay where they are,” she said. “They have their budgets and will choose to spend it on additional limit up top; if they need added limit, they will keep their retentions right where they are,” she suggested.

The property reinsurance market has seen reinsurer capacity and supply come a long way to close the capacity gap that delivered the hard market in 2022/23 and that motivated Everest Re to conduct one of the largest capacity increases documented in the current cycle, a mid-2023 $1.5 billion equity raise.

That May 2023 capital raise was used expand its capital base to take advantage of growth opportunities during the hard market period.

But the market’s capacity side gains have not run ahead of the story, with the demand side keeping up the pace and protecting the market from any slippage against 2023’s gains in treaty terms. 

“There does seem to be adequate capacity,” Tibbitt said of a market she notes has absorbed about 10 percent more limit purchased to date in 2024 year over year. But she is “happy to see” no new startups seeking to disrupt the party. That could be about to change if rumours at APCIA are correct—but for now the status quo remains.

“We do not see the lack of supply that got us here,” Tibbitt said, “but we feel the market is healthy, responsible, and disciplined. 

“We’re not overly flooded with capacity, but I think there’s adequate capacity to fill the needs for 2025.”

Early round talks with cedants at the Monte Carlo Rendez-Vous had confirmed for Tibbitt that cedants will bring “still more demand for property”, especially in the rising upper layers of programmes.

“Folks who want to buy at the top of programmes will find capacity there,” Tibbitt acknowledged, “as markets find that to be a safer place.”

She speaks to the influence of insurance-linked securities (ILS) on the market following record issuance in parts of 2023 and into 2024. But she doesn’t feel the sector is enough to tip the scales. “Cat bonds have a nice place in the tower, but I don’t think it is overabundant.”

Property considerations

Everest Re’s own appetite has a global reach, but Tibbitt has a specific focus on the Americas in terms of where she eyes opportunity at the moment. “I would say the Americas, Canada, the US and Latin America,” she told APCIA Today. That forecast comes with a caveat for Canada, where losses have been “significant” and terms and conditions “will improve”.

Everest Re’s to-date move into property and property-cat has led the group to shift into lower frequency probable maximum losses, and add proportional treaty.

Tibbitt acknowledges the appetite for pro rata, but also wants to highlight the demands placed on such portfolios.

“It’s the right time to partner with someone on a dollar-for-dollar quota share basis,” Tibbitt said, to reiterate the running Everest Re view that conditions in the primary property market look ripe. For its best long-term partners “we are open for business on pro rata as well”.

She added: “This is a way we can support our clients without going back to aggregate structures or structures overly expensive for clients or unattractive for reinsurers.”

“We are open for business on pro rata as well”.

The fruits of this strategy could be seen starting to emerge in its second quarter results. In what were bullish figures overall, its reinsurance gross written premiums increased by 16.5 percent to approximately $3.2 billion. The growth was driven by a 31.4 percent increase in property pro rata, 25 percent in property catastrophe excess of loss, and 19.6 percent in casualty pro rata (driven by increased rate), the company said in its Q2 results.

Juan Andrade, Everest president and CEO, praised the performance of the reinsurance unit. “Our leading reinsurance business continues to achieve excellent risk-adjusted returns, again evidenced by our success through the most recent renewals,” he stated.

Tibbitt said the 2024 natural catastrophe season has yet to force any major changes to Everest Re’s appetite, although learnings are clearly at hand. 

Hurricane Helene delivered the single largest lesson for the season, rendering its largest impacts outside of wind and well away from the landfall location, a key consideration for any reinsurer with a notable footprint in the US southeast.

“With Debby and Helene, what is different is the greater impact of inland flooding and river flooding than of storm damage,” Tibbitt said. “We as an industry need to be developing better ways to analyse inland flooding.” 

For more news from the American Property Casualty Insurance Association (APCIA) click here.

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