Reinsurers need to double down on staying relevant: Guy Carpenter chair

The good news: reinsurers are thriving, their position is strong. The bad news? Insurers are bearing higher losses; some are struggling. Balance is key and reinsurers need to listen to their clients, to add value and help solve their problems.

That is the view of David Priebe, chairman of Guy Carpenter who highlights the “significant market correction in terms of structure, pricing, and coverage”, which occurred some 12 to 18 months ago. 

This has dramatically improved conditions for reinsurers, he said, and it has led to strong results. “Last year, returns on equity were nearly 20 percent. Looking ahead to 2025, we expect things to remain very strong,” Priebe said.

But there is a flipside: “Primary carriers have seen some improvements in their underlying results due to portfolio and pricing changes. But they’ve been forced to retain a significant amount of increased losses, which they haven’t yet built into their forward-looking pricing.”

As a result, some insurers are struggling to meet their targets. But things could start to change. “The gap is narrowing,” Priebe observed. Over the next 12 to 18 months, he believes more parity will develop between insurer and reinsurer returns.

“But right now, it truly feels like a tale of two cities: reinsurers are happy, while insurers are still struggling. They are saying: ‘I need help. Show me the path forward’,” he remarked.

His key message to the reinsurance industry is clear: “Reinsurers need to double down on staying relevant and truly step back to listen to their clients. What are their concerns, and what do they need? From there, work hard to solve those issues and deliver real value. 

“It’s time to get back into the job of serving the customers—the primary insurance clients and the capital providers. Striking the right balance between these two is essential.”

Priebe pointed out that while reinsurance pricing is “generally at a sound level” it may “start moderating downwards”.

He added: “Emerging issues will still need attention, but reinsurers have never been in a better position.”

“We need to tackle the issue around talent collectively.”

Growth in Asia

Turning to Asia specifically, Priebe is optimistic. “The basic P&C market continues to improve and expand, creating ample opportunities,” he said. As insurance penetration levels rise and economic development accelerates, “the marketplace will see significant growth”.

“Just look at Singapore—the level of commerce and development is unbelievable. We’re also seeing the managing general agent market expand, bringing specialised expertise into the spotlight and opening new opportunities,” he said.

Guy Carpenter is expanding its capabilities in the life and health sector, where it eyes opportunity. The market is becoming more accessible, he explained, allowing for new capital to enter, requiring deeper expertise. 

“This includes building our individual risk business on the treaty and facultative sides, as economic growth continues across Asia,” Priebe detailed.

Challenges remain. “The top concern of industry leaders is how to grow profitably,” he said, which leads to complex questions such as: “where and how do I grow?”.

Climate change is another headwind. “Flood, wildfire, hail, and severe convective storms—these risks are becoming increasingly significant,” he said, adding that regulators can be slow to respond. “In highly regulated markets, you might not get the pricing you need to cover these emerging risks.”

“We’re seeing service companies invest significantly in their cyber propositions.”

The new norm

Global catastrophe losses, Priebe pointed out, are trending towards $120 to $125 billion annually. “That’s the new norm,” he said. Liability risks, such as social inflation and erratic post-COVID-19 verdicts, are also a big concern. “There’s still uncertainty, and it could take a couple of years for things to stabilise,” he said.

Earnings and capital management remain pressing issues for insurers. “Primary carriers no longer have the ‘earnings umbrella’ from reinsurers and are now retaining more losses, which forces a rethink of strategies,” Priebe explained. This shift has intensified the focus on portfolio balance and capital adequacy, and uncertainty over geopolitical events has everyone on edge, while the question of how to use artificial intelligence effectively while managing its risks is also on executives’ minds, he added.

Priebe is confident about the sector’s resilience, however. “Most well-managed carriers have strong reserving structures, which should help them weather potential volatility in 2025 and beyond,” he noted.

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