GC: Much to inspire confidence among (re)insurers
A highly complex risk environment caused by influences within and outside of the sector, coupled with the evolving dynamics of a hardening market, are generating significant volatility within the reinsurance sector, yet there is much to inspire confidence amongst (re)insurers. This was the consensus among panelists at a recent virtual media briefing “Materialising Possibilities” hosted by Guy Carpenter, addressing conditions across the property, casualty, retrocession, and specialty markets, as well as capital shifts, insurance-linked securities growth, and cyber risk evolution.
In his opening comments, Dean Klisura, president and CEO of Guy Carpenter, remarked: “2022 has been a very challenging year for our clients and we expect the renewal at January 1, 2023 to be equally challenging in key segments of the market.”
Describing the factors driving current market complexity, he touched on macro-economic conditions, rising core inflation, increased frequency and severity of global catastrophe losses, geopolitical conflicts, and constriction of property capacity in certain segments.
Providing further assessment of market conditions, David Priebe, chairman of Guy Carpenter, addressed the impact of several macro-economic challenges, including inflation, historically low consumer confidence, and the slowdown in GDP. However, against these headwinds, he stated that the market had now been in a “firming cycle for 19 consecutive quarters,” which put the sector on a “stronger footing” to deal with emerging challenges.
Against this backdrop, Priebe added: “Demand for reinsurance is expected to remain strong as risk awareness and desire for downside protection is pervasive across the industry in this uncertain environment. Overall, this is one of the most challenging and complex markets seen in years and January 1 will likely follow the wide range of renewal outcomes achieved at mid-year.”
Commenting on the substantial movement within the property sector, Lara Mowery, global head of distribution at Guy Carpenter, described a transitioning market compared to 2021.
Looking ahead to January 1 renewals, Mowery commented that both “inflation and the drivers of evolving loss expectations” will be at the forefront of all negotiations. As a result, risk tolerances will continue to shift, and demand is expected to increase. She added: “While in the past we may have seen the industry flex to accommodate three percent – five percent growth in a given year without any strain, the 2023 ask of property reinsurers will be multiples of that.”
