With climate change and growing inflation as a backdrop, the opportunity in property insurance is expected to be a long-term one with pricing more adequate than in property reinsurance, said Beazley CEO Adrian Cox.
Speaking earlier during the specialist insurer’s H1 2023 earnings call, Cox said: “We do think that the property insurance market is making a real shift to align to the fact that, for property insurance, particularly stuff that has catastrophe exposure, is more complicated and more changeable than it had previously been given credit for.”
“That demands a real shift in how it’s underwritten, there is evidence that that is happening,” he continued. “Some of our confidence for 2024 is driven by the fact that we see that property primary insurance opportunity as being a long-term one.”
The CEO went on to explain that commentary around the market from the large reinsurance companies suggests confidence in the fact that the reinsurance opportunity is also going to persist.
“If that continues, there’ll be opportunities for us there as well. But, as I mentioned earlier, that is a smaller part of our overall property business and we’ll continue to capitalise on that as long as that opportunity does persist,” said Cox.
This year so far has experienced a lot of climate-related activity, including severe convective storms amongst other events, Cox pointed out.
He added: “One of the reasons why we’re concentrating our property insurance play in the E&S market is that you’re better able to underwrite to that in a bespoke way and I think we’ve done that well.
“Thinking about all the additional perils that manifest in losses these days and so, the activity that’s happened so far in North America hasn’t caused us to need to update our guidance, in terms of the combined ratios that we’re targeting, nor has it made us pivot how we’re underwriting.”
Because this is something that Beazley was anticipating, Cox stated that the carrier is confident in its strategy.
Cox continued: “On the reinsurance side, one of the things the reinsurance market has done, by adjusting the attachment point at which treaties can come in, is to get away from some of that noise.
“We’re underwriting through that, and we’re able to because it’s E&S business on the insurance side and we, along with the rest of the reinsurance market, have moved away from that noise on the property cat side.
“If you judge us by our actions, we’ve not not grown our reinsurance exposure, we’ve grown our insurance exposure, which kind of gives you a clue as to where we think prices are more adequate.”
Cox highlighted that things will continue to move mainly due to climate change and changing inflation. He said: “It’s a moving feast, isn’t it? Climate change in our view will continue to make things more volatile and more active over time and inflation builds year on year.
“So if prices stay flat, next year, relatively speaking, they’ll be less adequate next year because you’ve got to factor in new, increasing impact of climate change and increasing year on year inflation.
“So we think broadly speaking, they’re okay for cat and and attractive for insurance, but they will continue to need to adjust to reflect the ongoing exposure changes that we don’t think are going to stop.”
Currently, he believes that, from an underwriting point of view, property insurance pricing is more adequate than reinsurance.
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