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May 2024

Guy Carpenter expects reinsurers to remain sensible in Jan negotiations

Source: AIR | Dec 2017

Guy Carpenter’s President (International), James Nash, expects reinsurers to take a “rational” approach during the January 2018 renewals considering the relative strength of their aggregated balance sheets.
   “The market will likely be rational rather than emotional, and compared to 1992 and 2001 when the market was significantly disrupted, the evidence so far is that it hasn’t been significantly disrupted in 2017 so I believe that reinsurers will take a rational approach to the renewals,” he told Asia Insurance Review recently.
   Industry analysts have largely suggested that rate increases for property business could be between 5-15%, as the availability of both traditional and alternative reinsurance capital would put a lid on price surges.
   Reinsurance pricing has fallen by approximately 40% over the last decade. However, a string of large losses in December may still lead to the kind of pricing correction that reinsurers are expecting – something the California wildfires alone did not manage to do. Modeling firm AIR Worldwide has estimated the fire losses to be between US$8-10.5 bln.
   Mr. Nash said that while alternative capital would be here to stay despite this year’s large losses, it remains to be seen how the segment will develop and mature after its first real test. He referred to how ACE and XL evolved over time after their creation in 1985 following the casualty crisis, and how the Bermuda market has also evolved following its formation in 1992 after the collapse of the property catastrophe market.
   “If you look at the history of new sources of capital coming into our market, they don’t stay still but rather change and evolve…and I expect the alternative capital market will also evolve. Although the difference here is that they did not come in to fill a gap in the market but rather they complemented it,” he said.
Positive outlook for the business
Mr. Nash said Guy Carpenter expects growth in all its traditional product lines next year, and have also devised a strategy to open up new areas of the market.
   “We see tremendous opportunity to open up new areas of the market throughout the region, and we will see potential growth in those as well.”  A 
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