With recent reports from firms such as Aon and Guy Carpenter suggesting that the reinsurance sector is likely to see favourable renewals mid-year, cautious optimism seems to best describe the market mood.

After the well-documented challenges of a few years ago, there is relief in the “organised” nature of recent renewals, notes George Cantlay (pictured), a partner in the reinsurance team at McGill & Partners, where he works closely with clients specialising in both property and casualty (P&C).

The recent capital increase is also well documented. “Reinsurance is cautiously optimistic about the market at the moment, with most lines of business in a healthy position,” he said. “At the same time, people continue to watch the changing risk landscape very carefully, whether that’s ongoing concerns about inflation, climate change considerations, or systemic loss concerns related to different geopolitical circumstances.”

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This increase in capital and the shift from reinsurers to a more optimistic mindset has led to the market being more open to innovative ideas. Reinsurers have proven to be more open to exploring more innovative and customized ideas and solutions.

Maintaining this momentum is dependent on great messaging around how these solutions meet customer needs, Cantlay said. “The fact that there is more scope to put these more complex problems together fits very well with our business model as we look to address the complexity of current issues with innovative solutions,” he added. “Working with reinsurers to explore new avenues for innovation is a great catalyst for us to do that. So, I think this is a really exciting time to be a buyer because there is an opportunity to put out very innovative products.”

P&C Treaty Clients

P&I treaty clients across the market today – particularly those in the Lloyd’s market – are in a similar position to the wider sector, with rates across most lines of business performing very well. Lloyd’s results demonstrate this with an overall ratio of 85% and a return on capital of 25%.

“All of this is very positive from a financial perspective, but again, people are aware of the impact of the ever-changing risk landscape,” Cantlay said. “While there has been a very positive set of results for 2023, it is really important that we demonstrate as an industry that this is going to be sustainable and profitable.

“We are in a fundamentally volatile industry, so making a profit for a year or two is not going to be enough, it has to be sustained over a period of time. That way capital providers can have confidence that the capital invested is generating the right returns.”

Processing reinsurance renewals

There are a number of factors that offer the potential to rock the profitability boat, and the specter of systemic uncertainty, whether it be geopolitical uncertainty, climate risk or any other risk vector, is what is driving demand for innovation in reinsurance.

Whether you’re having an early-stage discussion or involved in a renovation, it shouldn’t be a case of simply ripping out an old template and reusing it, but finding ways to deliver a truly personalized experience from start to finish. That means treating each renovation like a RFP, starting from scratch each year to make sure you still understand their needs and how they might change, Cantlay said.

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