“We’re hopeful and optimistic for a boring renewal,” Tom Orton, reinsurance underwriter at Ariel Re, told Intelligent Insurer in a joint interview with colleague Giovanni Maccioni, underwriter–property reinsurance at Ariel Re.
“Last year, there was a kind of misalignment between what the clients thought they could buy, what the brokers thought the market would do, and what the market actually
did.”
He said that everybody was thinking: “who’s going to move first?”, but then nobody moved until mid- to late December. “It was a bit stressful for everybody.”
Maccioni said that in terms of improvements in terms and conditions, Ariel Re believes that the positive momentum should continue, but not in the same way as last year.
“We think that retention should keep up with inflation, and there should still be a positive momentum in terms of price increasing. Even if this year turned out to be positive for insurers, we shouldn’t forget what happened in the last six years in terms of cat activity.”
Maccioni added that for investors, one year of success doesn’t make up for six poor years.
“We have to convince investors and strengthen their confidence on the profitability of this market to maintain that capital and work on more capital to meet the demands from a limit driven by inflation,” he explained.
Orton added that while he does not think rates would drop, if they did it would be difficult for a lot of investors to come in. “They’d be looking at the market thinking ‘we should have done it last year and now we’ve missed the boat, so what’s the point of coming in?’.”
With alternative capital a recurring theme of the conference, Orton said that Ariel Re “is mostly traditional reinsurance, but we are very active in attracting new capital”.
A key difference between 1/1 this year and 1/1 2024 is that cedants are more prepared to listen, said Maccioni and Orton.
“Last year was a bit of a shock for them. Hurricane Ian happened between Monte Carlo and Baden-Baden, so it was a bit of a distressed 1/1. Cedants are more ready to listen to reinsurers and maybe some small adjustments.”
Orton said there would probably be more bespoke solutions for clients that need them because last year there was a lot of stress into late December, trying to place some of the core cat programmes. There was even some done in January and February as people tried to fill in some of the gaps with alternative structures, he added.
“This year, if there is no big hurricane, or earthquake loss in the US, the core placements will be done quite easily. Then it’s trying to work out: ‘We have this extra budget to spend, let’s get a second subsequent event down low, let’s try and protect our earnings a bit more.’
“I think we’ll see more of that into December.”
The underwriters agreed that there is more interconnectivity between what’s happening in the US and the rest of the world.
“Everyone is watching the hurricane season and there is maybe false hope that it’s over already. But the climate has changed: November is the new October. It’s going to be quite a long season and it’s not over yet. Anything can change,” Orton concluded.
