Broker: 2023 reinsurance sector results set to be a record
Full-year 2023 results for the reinsurance sector are expected to be record-breaking, according to the CEO of independent Bermuda reinsurance brokerage ReFlex Solutions.
Neville Ching said looking forward he believes that the first three quarters of 2024 are set to be just as profitable, setting the tone for the 2025 renewals.
“What a difference a year makes,” he said.“ The ‘great market reset’ of 2023 changed the reinsurance landscape for the better.
“A focus on underwriting profitability and tighter terms and conditions created a much needed change in the market that has led to a healthier and a more sustainable trading environment.
“As a consequence of the hard market conditions, the 2023 full year results from the reinsurance sector are expected to be record-breaking — with many combined ratios sitting not just under 100, but down well into the eighties.”
Mr Ching said that 2023 was a record year for catastrophe bonds with the trend set to continue into this year.
“For the first time in years, investors will receive good news and handsome profits from their ILS managers,” he added.
“Existing and new investors in the reinsurance sector are poised to enjoy the rewards from the reset and Lloyd’s will continue to flourish after a number of new initiatives to attract new investors and a strict focus on underwriting profits.
“Brokers will continue to innovate using all the tools in their armoury to produce creative solutions for their clients. This will result in clients being better served by the industry.”
Reflecting on “frantic and stressful” 2023 renewals, Mr Ching said: “The January 2023 reinsurance renewals were some of the most difficult and gruelling in recent memory, resulting in dislocated reinsurance protection as the industry contended with multiple issues.”
Mr Ching said the “oversupplied and ill-disciplined” period throughout the ‘tenties’ — 2010 to 2019 — “left us with a marketplace that was fragile and ultimately unsustainable”.
“As an industry, we have had to contend with multiple ‘grey swan’ events and not enough fuel in the system to meet the new norm, which was global aggregate insured catastrophe losses of $100 billion-plus, versus the previous average in the decade 2012 to 2021 of $85 billion in aggregate.”
Mr Ching said there will be opportunity in 2024 with the return to a balanced and sustainable market.
“Nobody wanted a repeat of the rancorous negotiations from last year (January 1, 2023). The market worked together to ensure there were no surprises and a better alignment of expectations.
“There were still some tensions and vigorous discussions around pricing and attachment points. The relationship ‘dance’ between broker, insurer and reinsurer is based on nuanced and established relationships, and a consistent rhythm to discussions returned.”
Looking forward to this year, Mr Ching said: “Investors are providing more capacity as confidence returns to the reinsurance market. Investors returning or entering reinsurance for the first time will find a stronger market following the 2023 industry reset, and a highly-disciplined environment that will now present the opportunity for incumbents, returnees and providers of fresh capital to achieve long term value.”
He added: “The 2024 outlook is positive for the reinsurance sector, particularly for investors who been calling for a more secure and profitable environment. The industry-wide reset has created a more sustainable market with long-term relevance and new opportunities.
“This has paved the way for entrepreneurial talent to continue to set up their own shops and target the specialist business lines.
“As a result, the delegated authority and managing general agents space is likely to receive a boost as the offering is clearer and more compelling than in previous years. The growth of the US excess and surplus market is set to provide investors and capital providers with opportunity to grow in niche territories and products.
“Underwriting talent matched with technology will also continue to drive change in the market.“
•To see Neville Ching’s statement in full, see Related Media
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