
Casualty reinsurance still underpriced, says Catlin
The casualty reinsurance market is still underpriced even though rates have improved since the disastrous years of 2015 to 2019, Convex founder Stephen Catlin (pictured) has told attendees at the Bermuda Risk Summit, which is taking place in Bermuda this week.
Catlin, the executive chairman of the company, which was founded after that period, said the hole from seven to eight years ago had still not been filled.
He said at the time he estimated the shortfall in casualty was around $100 billion, but in fact it was more like twice that, but if he had said it was $200 billion, no one would have believed him.
Speaking on a panel of re/insurance leaders at the Bermuda Risk Summit, Catlin said that while rates were now higher, they were still underpriced and losses continued to make a debt due in part to social inflation.
“A lot can go wrong in casualty,” he said. “ Casualty is much harder to write than property. If made mistake in casualty you won’t find out for five years, and you could repeat the mistake four more times before realising it.
“I worry about casualty and always have. You have to got to get ahead of the game, so you are not always chasing your tail.”
Arch Capital chief executive officer Nicolas Papadopoulo agreed that the problem in the casualty years 2014 to 2019 was in the pricing.
“No-one has a gun to their head to write casualty,” he said. “The law of gravity is you will lose money if you underprice it.”
Despite the problems with casualty, all of the Bermuda re/insurance leaders on the panel said their companies had been successful in 2024.
Papadopoulo, who became CEO of Arch last autumn, reflected on the fact that when he joined the then start-up in 2001, it had $1 billion in capital and its market capital is now $35 billion.
He said part of the secret of Arch’s success was that its CEO and reinsurance team had always been based in Bermuda.
He said there were tremendous opportunities going forward and the companies that developed the best insights into their customers and provided the best customer experience would win the race, which had already started.
Papadopoulo said companies that leveraged computing power to make bespoke decisions with speed and quality for their customers would be successful.
Hiscox Re & ILS chief executive officer Kathleen Reardon said Hiscox had a second “extraordinary year” with its retail operations back in growth mode. She said Hiscox Re & ILS enjoyed market leading results with a 69% combined ratio.
Given the high level of catastrophes in 2024, she said this was a credit to the company’s staff.
Christian Dunleavy, president of Aspen Insurance, who took part in the panel after scheduled participant and Aspen CEO Mark Cloutier fell ill, said the company had a third successful year as it navigated geopolitical, climate and political risk.
A highlight for the company was bringing $1.5 billion of capital into casualty insurance-linked securities from a total of $2.2 billion of third-party capital. This showed investor appetite is there, he said.
“Casualty is the one that really hurts if you get it wrong,” he added. “The fact there is that much investor interest in a difficult environment is testament to how we serve the customer well.”
Dunleavy added that the world had been afflicted by pandemics, wars and climate events in the last five years, which put a premium on a company’s creativity.
He said there was a genuine need for public private partnerships to deal with the very largest risks.
Catlin noted that Convex had celebrated starting its Lloyd’s syndicate and had exceeded its top line growth projections while profits were in line with expectations.
Catlin, who founded his first insurance company in 1984, said there was more uncertainty now than in any period in his lifetime.
“It is dangerous to be too bullish in the industry,” he said. “If there was a time for the industry to pull together and work together, it is today.”
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