16-09-2020
Reinsurance remains effective tool during pandemic
Insurance AlertssReinsurance remains effective tool during pandemic
According to a panel of speakers at a recent media briefing hosted by Guy Carpenter, the impact of COVID-19 - the first globally systemic insurance loss - has put pressure on the (re)insurance marketplace which has already been addressing challenges on multiple fronts.
During this period, reinsurance is noted to be a highly effective tool to enable insurers to respond as perceptions of risk are altering across the sector.
Titled ‘The Changing Nature of Risk’, the media briefing was led by Guy Carpenter chairman David Priebe and joined by a range of speakers including global head of distribution Lara Mowery as well as managing director Christopher Ross.
In his opening address, Mr Priebe highlighted the myriad of market developments providing the backdrop to the January 2021 renewals – ranging from COVID-19-related losses and rate movements at the mid-year renewals through to tightening capacity across certain insurance classes and loss developments on long-tail lines of business.
According to him, putting capital to work to create new coverages and meet evolving demands will be crucial in securing the reinsurance sector’s long-term relevance. “It is important to remember that transformative events have led to product innovation many times before. We expect a similar playbook this time around. Reinsurance will be crucial in supporting insurers in this endeavour, by supporting capital positions and reducing volatility,” he said.\
Focusing on developments in the property reinsurance sector, Ms Mowery highlighted the fact that current levels of economic uncertainty were generating “a heightened cautiousness to deploy capacity unless pricing and other terms met specific thresholds”. “As we look ahead to the January 2021 renewals, there is an expectation that renewals will be more complicated and that negotiations will take longer than the norm. One aspect of this that contributes to the duration of the process is the increased differentiation we have seen in renewal outcomes,” she said.
In the context of current market uncertainty, Mr Ross said that pricing is expected to continue to increase and with limit and attachment point strategies currently in place, further hardening in the overall casualty market will take place.
“To adjust to these conditions, finding the proper capital management strategy is critical. The market will need to find the balance between allocating capital to potential past losses versus deploying it now to support business growth in a hard market,” he said.
Source: Asia Insurance Review
