Floods and ILS will dominate discussions

The implications of the German flood losses will be a big topic of discussion at Baden-Baden this year, with a particular focus on actual losses versus modelled losses.

That is the view of Andrew Barnard, managing director and head of international property-catastrophe reinsurance at Markel. However, he believes the overall results of such comparisons will be very positive.

“By the looks of it, some companies have done a superb job on the floods,” he said. “They made certain predictions based on improved information and improved underwriting and low and behold the flood is what they said it would be, which is very impressive.

“The industry has coped pretty well because it was not a surprise. The industry doesn’t deal well with surprises but I really think the floods hit reinsurance programmes as they expected.”

As such, he anticipates that any price increases resulting from flood losses will be restricted to quite narrow geographical areas.

“There is scope for some increase but the days are gone when, if a specific territory took a loss, then the whole region took some of the pain and the prices went up all through that region.

“For right or for wrong, pricing increases have now become very territory specific. Say there was a loss in Germany, it would only affect German companies.”

Another key topic for reinsurers this year will be pressure on rates, especially in the context of some catastrophes such as earthquake, which he says are not well understood by the industry.

“We don’t have many data points for earthquake. It is a very difficult product to price effectively, and I think that’s a huge challenge,” he said.

He also anticipates further talk around the impact a growing ILS market will have on the industry, although he warns this should not dominate the conference.

‘You can’t escape the ILS topic, but it is here and people have to talk about it,” he said. “I just hope that some of the excess capacity in the US doesn’t flow into the international market and make it softer. The market is already soft enough without some other players coming in, but I’m not sure the margins will attract them that much. International business has a much tighter margin than US business.”