Low investment returns and risk of hurricanes force caution
Potential hurricane claims while insurers get low investment returns means, reinsurers must make sure they have a big capital cushion, Standard & Poor's annual insurance conference was told, Reuters reports.
"This is the year you don't bet the bank. You preserve capital," said John Charman, chief executive of Bermuda-based insurer and reinsurer Axis Capital
Marston Becker, chief executive of Max Capital Group said: "We know this is the year to shepherd your resources and make sure you are there for the next day."
Max Capital is linking with Bermuda reinsurer, IPC Holdings to bolster its capitalisation.
Charman said it was important to hold on to capital now because aggressive policy pricing may have already left some in the industry exposed to losses at a time when earnings prospects had been dampened by poor investment returns, Reuters reports.
Charman said there may be rewards for those who can resist the urge to be spendthrifts now -- a tall order given the temptation to underwrite more business to bring in additional revenue and make up for depressed investment returns.
"A number of us believe that the market will harden significantly going into the next year," he said. "At Axis we (keep) surplus capital because we like to be opportunistic" and able to respond quickly when opportunities are best, he added.
