The extent of the California wildfires caught the global reinsurance community off-guard, a Bermuda reinsurer has observed.

“It’s a loss that the market probably got slightly wrong. I don't think any of us really forecast the 40 or more billion-dollar loss from California for that peril,” the chief executive of Ariel Re, Ryan Mather, told AM Best TV.

He said it led to a lot of soul-searching “to figure out what mistakes we made, and how did we get the models wrong. We’ve had to adapt the models so that we take it to the next challenge and come out a better underwriter”.

Mr Mather said: “We all learnt an awful lot of lessons. And we now know an awful lot more. We're putting those lessons into practice, and I think we've become better wildfire underwriters. We will certainly miss a few things along the way, but that's the nature of the beast.”

He sees artificial intelligence in the reinsurance industry as “the biggest opportunity and the biggest challenge of our era”.

He explained: “We're in a data intensive industry so using AI, large language models, can only be a benefit for us, spotting patterns in data that we otherwise couldn't spot.

“But also in terms of administration and the middle and back offices, certainly there's no doubt that we can put that to work and cut our expenses effectively.”

He said the AI opportunities also come with threats: “Think about all the cyber bad actors and what they can do with these models. It's already happening. So, certainly there are threats and then there's obviously people who are going to be thinking about legislation and I can't predict what that's going to look like. But the world is going to change, as it always does, it's going to change relatively quickly from here.”

A veteran underwriter himself, Mr Mather has been with Ariel Re since it was a start-up in Bermuda two decades ago.

Five years in as CEO, he told AM Best TV’s Richard Banks that he did not completely buy into the binary concept of hard and soft markets.

He said: “I think within any market you've got the subtleties of the client relationships, the different markets and the different geographies.

“But there's no doubt that we have been in a very attractive market over the past few years. And as a result of that, there's been more scarcity of capacity in certain areas, and clients have had to cut their cloth accordingly.

“When you don't have the full availability or the full budget to be able to buy everything you ever wanted or ever dreamt of, which you probably could do in 2017, '18 and '19, you have to make some sacrifices. So some clients have bought maybe a little bit less at the top of programmes, some have bought a little bit less at the bottom of programmes, some are taking sideways retentions and probably less earnings protection.

“So there are a whole variety of ways you can do that. Maybe the time has changed and maybe we're going to go back to looking at some of those alternatives for the clients as budgets get stretched even farther.”

Meanwhile, the Bermudian reinsurer’s Lloyd’s managing agent has just been given Lloyd’s approval for the formation and management of Ariel Re Syndicate 2006 to underwrite both specialty and property reinsurance lines for the 2026 year of account.