Missing Monte? Executives weigh in
Reactions asked: How close are reinsurers to achieving true rate adequacy?
CHRIS BEAZLEY, HEAD OF REINSURANCE, MS AMLIN:
I think the answer varies across the different classes of business. Clearly, some classes of business are in a better environment than others. There is still a lot of this year left to run and it remains to be seen how the rest of the year pans out in terms of losses, both COVID-19-related and catastrophe. Indeed, it also depends on how you measure rate adequacy. Our business is here for the long term. We recognise that there is a market cycle and we measure performance over the course of that cycle. Generally, we are moving across all our product lines in the direction of rate adequacy, but we do still have some way to go.
MICHEL BLANC, CEO OF REINSURANCE, SCOR GLOBAL P&C:
Meaningful and sustained rate increases are necessary to get back to rate adequacy and an appropriate remuneration of capital.
To put things into perspective, the P&C reinsurance market has undergone a long “soft” market period, with chronic underpricing that has failed in keeping up with loss-inflation trends for both Property and Casualty. For the former, the series of large Nat Cat events over 2017-2019 in the U.S., Caribbean, and Japan have been coupled with a rise of secondary perils, which were not necessarily properly modelled; but are driven by climate change, hence recurring issues. As for Casualty, social inflation trends remain as relevant as ever and need to be effectively reflected through increased reinsurance rates. Finally, uncertainty due to Covid-19 loss assessment and the ongoing active Cat season will need to be taken into consideration.
In addition, the lower interest rates environment requires an improvement of technical profitability to compensate for declining investment yields.
In that context, we expect material and long-lasting rate increases to materialize at the upcoming renewals.
