Pre 1/1 renewals sneak-peak with Liberty Mutual Re’s Winkel

Dieter Winkel can boast a 40-year career in the reinsurance business and now leads a global reinsurer with around $3bn in gross written premium and approximately 250 employees.

President of Liberty Mutual Re Dieter Winkel was the latest guest to feature on Mark Geoghegan’s Voice of Insurance podcast. Happening late in the year, the conversation was just ahead of the imminent 1/1 reinsurance renewal season – very timely.

The reinsurer has offices across the globe, underwriting almost every line of property, casualty and specialty business. Winkel stresses continuity, long-term thinking, strength and stability – a leitmotif of the episode and a nod to the reinsurer’s mutual insurance parent, Liberty Mutual.

Two years of hard pricing after nine years of previous soft market has been a necessary correction towards sustainable pricing, he emphasises. Winkel doesn’t think we’re in a hard market, having come down slightly from last year’s peak, amid fresh capacity deployed and increased competition, but he calls conditions “decent” for the imminent renewal.

“We need to be careful that we’re not damaging this too much, because we know our world is riskier. I’m not talking about property catastrophe business, with climate change, but also the geopolitical environment,” he says.

He lists political violence as one such “challenged class”, as well as trade credit, and cyber the still-emerging cyber market business. To build out cyber in particular, he emphasises the talent pool, relationships and distribution, and the products themselves will need to be carefully built out. Scenario planning is core to exploring emerging risks, he notes, using the example of CrowdStrike as an event that – despite its limited cost – led to uncertainty about aggregations.

“It’s maturing, but we are by far not at the end of the journey. I compare it with the cat market, when we started modelling that some 30 years ago,” Winkel says. “How often did we get it wrong? How many one-in-100 year [events] did we have in a decade?”

Looking to 1/1, Winkel says “a few firm orders” in Europe are out already.

“The market is, in principle, very disciplined. I think we’ve learned our lesson from the past. I can’t ignore the fact that people have seen good results over the last one or two years, and lots of people who have more appetite,” he says.

“There is more competition coming to the market. On the other hand, there is also more demand, depending on the class and the area. I do believe there is a fair, reasonable balance, we’ll see a competitive market environment,” he continues.

On property catastrophe reinsurance, Winkel highlights the pressure facing underwriters as risk-takers, relative to brokers, when a US hurricane is bearing down on Florida, noting the temptation to check in on the track of a storm as it barrels towards concentrations of exposure, such as Tampa.

“Both [hurricanes] Helene and Milton were decent losses proper cats, by far, not as big as they could have been,” he says. “Had Milton gone into Tampa, for example, it would have been a significant change to the market. It would have held back renewals and capacity among the repercussions. Anyway, that didn’t happen. So the reality is that the impact on pricing, on structures, is modest, to be honest.”

The US cat market has corrected, in terms of retention levels and pricing, reaching “the right level”, while other international markets still have “more to be done”, he suggests.

He is concerned by flood risk “a big exposure and we have underestimated this”, Winkel says.

He lists floods from Germany and Austria, Spain, Dubai, Brazil and Canada. “We need to think about whether we are pricing this appropriately,” Winkel says.

“We need to get away from the point of saying ‘we just do this’, that it’s run of the mill losses, and eventually you get killed by it, and we don’t know how to deal with it going forward. We need to address it, and we need to have a proper product and a proper price for it, so that correction will need to take place,” he adds.

Casualty business is “a volatile area, a heated debate”, Winkel notes. While the issue is really with US loss trends, he is keen to point out the many other parts to the international casualty market, different lines and territories – all of which have more or less different dynamics.

For the US business that has got the industry chattering, it will take some time in this long-tail market to establish whether pricing increases are keeping pace with emerging loss trends. For his part, Liberty Mutual Re is “pretty conservative” about getting too embroiled, whether in the debate or the business.

“No one has the right answer to it. You can be very conservative or not so conservative, but you need to have a prudent approach, because that line of business will only go one way,” Winkel adds.