Will recent catastrophes force a rates rise?
Lloyd’s insurer Antares managing director Stephen Redmond
“The protracted soft market needs to come to a swift end, otherwise clients will face significant pricing corrections in the event of another major catastrophe this year. With historically low interest rates, unsustainable prior year reserve releases, and the high frequency of expensive natural catastrophes, improved conditions for (re)insurers is in our clients’ best interests.
“Although no major hurricanes have hit the US coastline since 2008, forecasters predict a 72% chance of at least one major hurricane making landfall in 2011. With profitability diminished, a tough first quarter behind us and the hurricane season ahead, now is the time to address the inadequacies of the premium base to ensure the capital base of the industry remains sound.”
Canopius Group chairman Michael Watson
“The issue is not whether the next catastrophic event is an earnings event or a capital hit. Rather it’s a question of ensuring underwriters charge the right price for the risks they assume. And for too long the industry has not been charging enough, especially outside of the USA.
“Having surplus capital is not a reason to under-price risk. In reality, the first quarter events are a capital event. With luck they might be disguised as an earnings event in 2011, but this will only be the case if accompanied by good fortune for the remainder of the year. Certainly, the recent US tornadoes do not help the prospects.”
Liberty Syndicates chief underwriting officer Matthew Moore
“As far as a rates rise is concerned, much depends upon the degree to which insurers have exhausted their reinsurance programmes already in 2011.
“Going into the US wind season with gaps in protections is a wholly unenviable place to be. Those insurers facing such a scenario will have to purchase back-ups and replacement covers in an expensive reinsurance environment.
For publicly quoted businesses, this is a particularly difficult place to be as volatility in results will no doubt be punished by analyst opinion.
“Inventive structures and aggregate-type protections do continue to become increasingly attractive.”