Reinsurers Need to demonstrate underwriting quality to attract cautious investors

To appeal to cautious investors, re/insurance carriers must distinguish themselves from the crowd.

This year’s Rendez-vous  de Septembre (RVS) in Monte Carlo was a return to form for the reinsurance market. Not only is the event itself reinvigorated after the pause of the pandemic, but the market itself is in rude health, looking to score a profitable year and continued hard market pricing.

The RVS is traditionally seen as the starting gun for 1/1 renewals discussions, but is also unfortunately timed for the peak of hurricane season, which adds a strong element of jeopardy to proceedings. This year – although the hurricane season is still in play – there has been no transformative mega-storm to spoil the party for the reinsurance market.

This means a number of things. Firstly, for those brokers and cedents who feared a repeat of the “disorderly renewal” experienced at the previous 1/1 – which saw shock price rises but also a hunt to find sufficient capacity – this year will be a picture of preparedness. Whatever the rate movement we see in different lines at 1/1, the market will function more properly than it did at the end of 2022.

In another respect, the market is not functioning entirely properly. There is a bifurcation happening that is seeing catastrophe losses soaked up by insurers, but barely reaching their reinsurers. Insurers have been pushed by pricing to buy cat protection at higher attachment points, (to buy at the same levels was prohibitively expensive). After another year with a profusion of severe convective storms and wildfires – so-called secondary perils – this means that many of these circa $1-5bn loss events will continue to be disproportionately felt by the primary market, with reinsurers sitting above, relatively unscathed.

The RVS is usually the forum for senior underwriters and brokers to talk up or down the market, emphasising the rate rises they want to see, or attractive risks that ought to lead to competitive pricing, respectively. This year the direction was clear: the hard market will continue; reinsurers are continuing to show discipline; terms will stay tight; it remains a seller’s market.

What was also clear is that the supply-demand dynamic is relatively unchanged. This is not just because traditional reinsurance carriers are showing discipline in pricing their capacity, but based on the levels of capital entering the sector, which remain relatively modest.

Investors, in the bigger macroeconomic picture of higher interest rates, are being choosy. They remain cautious about reinsurance business – especially cat exposure – after several years of inadequate pricing and large loss events. They want to see reinsurers demonstrate at least one quietly profitable year. It’s time for the carriers with the best expertise to stand out from their peers.

Underwriters will be keen to demonstrate discipline, showcase their quality, and outperform their peers in whichever classes they can add most value. Specialty classes are seen as major opportunities, but to grow profitably in such classes, or in volatile cat business, will require specialist underwriting talent and an edge in technology, data and analytics.

This is good news for AdvantageGo. Some of the biggest leads in our busy pipeline of product releases, new client announcements and future prospects, involve Lloyd’s and London market specialty business, including emerging risks such as renewable energy and cyber business.

Providing underwriting expertise with a market-leading edge is the goal of our platform, most notably through our underwriting workbench solution, as well as through our other applications that support dynamic exposure management or policy administration.

The goal is always to free up time and resources by triaging tasks and simplifying or shortening laborious processes, and to provide market-leading data and analytics inputs for better decision-making – whether that’s for risk selection, pricing or portfolio management.

To read more on what the key talking points were at this year’s RVS in Monte Carlo, take a look at our report ‘Maintaining Moment: RVS 2023’. Includes contributions from key industry players such as Aon Reinsurance Solutions, Guy Carpenter, Munich Re, SCOR, SiriusPoint, and Swiss Re.