The onset of the first hard market in more than a decade will be one of the defining factors of 2018—but rates softening or staying the same could equally represent a problem for the industry, according to an end of year survey conducted by Bermuda:Re+ILS.
Some 33 percent of respondents to the online survey highlighted hardening rates as being the most important factor facing the Bermuda market in 2018. But there were also worries expressed by some that rates will not adjust in the way many believe they should; others cited Brexit and the 2018 hurricane season as being issues to be aware of.
Don Kramer, chief executive of ILS Capital, said that maintaining attractive returns for investors will be the key issue of next year. But a number cited concerns around how a fresh supply of capital could dampen any increases.
“Will we get too much supply post-event and trigger a loss of discipline around the hardening market?” asked Greg Hendrick, president of property & casualty insurance and reinsurance at XL Catlin.
The influence of ILS and the supply of alternative capital on this dynamic was also cited by some as being a potential challenge. Robert Arvanitis, CEO, Risk Finance Advisors, noted that the ILS business model is inherently cheaper than that of operating insurers “Any extra pricing to chartered insurers ought to be seen as distribution cost,” he said.
But Greg Wojciechowski, chief executive of the Bermuda Stock Exchange, noted that the prevalence of ILS on Bermuda would only strengthen Bermuda’s resilience to big losses.
“The Bermuda market has proved resilient in the aftermath of large events as a recognised global player in property cat reinsurance. While also holding the largest market share of ILS structures globally, the evolution of Bermuda’s ILS market is also a case study of the Island’s ability to adapt, move quickly and leverage its expertise in risk transfer. We expect that to continue,” Wojciechowski said.
Some respondents cited proposed US tax reforms as potentially being a big issue in 2018. “Assuming the US tax bill passes, it has the potential to significantly disrupt or shrink the Bermuda insurance market,” noted one anonymous respondent.
Bermuda, Survey, Insurance, Reinsurance, ILS Capital, XL Catlin, Greg Wojciechowski