With recent reports from the likes of Aon and Guy Carpenter indicating that the reinsurance sector is likely to see favorable renewals at mid-year, cautious optimism appears to best describe the mood of the market.
After the well-documented challenges of a few years ago, there’s a relief in the “orderly” nature of recent renewals, noted George Cantlay (pictured), a partner in McGill and Partners’ reinsurance team, where he works closely with clients specializing in both property and casualty (P&C).
Also well documented is the recent increase in capital. “Reinsurance is taking a cautiously optimistic view of where the market is at the moment, with most lines of business in a healthy place,” he said. “At the same time, people are continuing to very carefully monitor the changing risk landscape, whether that’s ongoing concerns around inflation, climate change considerations or concerns around a systemic loss relating to various geopolitical circumstances.”
This increase in capital and the move from reinsurers to a more optimistic mindset had seen the market become much more open to innovative ideas. Reinsurers are proving to be much more open to exploring more bespoke and innovative ideas and solutions.
Keeping that momentum going is dependent on great messaging about how these solutions match clients’ needs, Cantlay said. “The fact that there is more scope to place those more complex problems fits into our wheelhouse fantastically given that we are looking to address the complex nature of current issues with innovative solutions,” he said. “Working with reinsurers to explore new avenues for creativity serves as a fantastic catalyst enabling us to do just that. So, I think it’s a really exciting time at the moment to be a buyer because there is opportunity to place very creative products.”
P&C treaty clients across the market today – particularly those in the Lloyd’s market – are positioned similarly to the wider sector, with rates across most lines of business doing very well. The Lloyd’s results speak to that with an 85% combined ratio and a 25% return on capital.
“It’s all very positive from a financial perspective but again, people are aware of the impact of the continually changing risk landscape,” Cantlay said. “While there was a very positive set of 2023 results, it’s really important that we as an industry demonstrate that this is going to be sustained, profit.
“We’re working in a fundamentally volatile industry so one or two years’ worth of profit isn’t going to be enough, it has got to be sustained over a period of time. That’s how capital providers can get the confidence that the capital at play is generating the right returns.”
There’s a number of factors that present the potential to rock the boat of that profitability, and the specter of systemic uncertainty, whether that’s geopolitical uncertainty, climate risk or any other risk vector, is what’s driving the demand for innovation in reinsurance.
Whether you’re having an early-stage discussion or engaging in a renewal, it shouldn’t be a question of taking out and repurposing an old template but rather finding ways to deliver a truly bespoke experience from start to finish. That means treating every renewal as if it is an RFP (request for proposal) process, Cantlay said, and starting from scratch every year to make sure that you still understand their needs and how they might have changed.
