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The wave of natural disasters that struck North America and the rest of the world last year led to an increase in insured losses seen in 2016 to $144 billion for 2017, according to a recent Swiss Re report. Yet the catastrophic year also led to a reckoning for property insurance pricing as rates continue to rise.
“As a property underwriter, the best way to describe 2017 is, it was a very, very interesting year. In 2017, we had major cats affecting some of our larger markets,” said Mark Bernacki, head of property at Beazley.
Whether it was Hurricane Harvey, Maria, Irma, or the Mexican earthquakes, or the California wildfires, each of those events had unique features that caused significant damage. Harvey brought unprecedented flooding tied to it, Irma was the largest hurricane coming through the Atlantic Basin, Maria came through and crossed a similar path to Irma, while both Mexican earthquakes affected Beazley’s Property Group.
“That really changed the market and made it more interesting. I wouldn’t characterize the market that we’re operating in now as a hard market, but it’s definitely a firming market that seems to be gaining some momentum,” said Bernacki. “The market is now reacting, not to the cats itself, but I think the cats exposed some of the ‘cheating’ that was taking place in the market.”
As the property market has moved through softening stages in the last five to 10 years, many property underwriters were ‘cheating’ by taking some of the cat margin that they had and used it to pay for attritional losses, according to the executive.
“The cats of last year really exposed some of the attritional underwriting underperformance and that’s why the market is now in a more firming state,” he said. For Beazley, “it’s opened up opportunities as we’ve seen rates increase in some of our core areas, like the Caribbean, like Mexico and like the cat-exposed US market.”
