Six months after sharing his views on the state of the reinsurance market – and one month after the RVS conference in Monte Carlo – QBE Reinsurance Managing Director Chris Kilorgy (pictured) joined Re-Insurance Business to provide a timely update. He said he mostly sees a strong continuation of the same themes, reflecting a move towards greater discipline and regulation across the sector.

“Often in reinsurance, we tend to focus on property catastrophes in the US,” he said. “During the June/July renewals in the US, we saw price declines in certain places, but it tended to be in the much higher attachment layers. We were disappointed to see the price start to be affected so quickly after the increases were implemented, but we were very pleased with the discipline that was shown, and that it was the upper layers that were affected by the price. In subsequent programs, we see that price discipline is still in place, which is great, and the attachment points remain strong.”

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Demystifying the Line Between Insurance and Reinsurance Companies

There has been increasing focus in recent months on reinsurers working to create a clearer distinction between where reinsurers and insurers play, respectively. In the years leading up to Hurricane Ian, that line had become quite blurred.

In Europe in particular, there were some secondary risks where reinsurers were not expected to see losses. The market has seen significant developments in the wake of the Italian storm (from the 2023 event) as well as some man-made disasters such as the New Caledonia unrest. This shows that there is still work to be done outside the US to ensure that reinsurers and insurers have better differentiation in terms of where they play, and that they have the right attachment points and rates – something that is often discussed outside the US on a client-by-client basis.

What is happening with market capitalization?

“Another theme in the real estate sector that we’ve seen is buyers buying more caps, which I think is really good for the market,” Kilrohe said. “People haven’t tried to give up their anchor point, buyers have been disciplined, but we’ve seen more buyers looking to buy coverage at the top of the program – which has led to increased demand for the reinsurance sector, which is great to see.”

“We’re not seeing new capital flowing in, which is mostly a good thing. We’ve seen some of the traditional reinsurers that have been around for a while restore their balance sheets over the last four months. So they’ve gained some capacity to expand this year.”

Overall, Kilorgy sees the market as “in a good place.” Traditional reinsurers are getting a little more confident, he said, but the market is not in a place where prices are so attractive that they are attracting large amounts of new capital and people see the opportunity to make a quick profit.

Building a track record of success

The reinsurance sector went through several years of not covering its capital costs, before the market saw a strong return in 2023, Kilorgy said. However, one year of return generation will not be enough for new investors to make a sharp turn towards wanting to invest in reinsurance.

The industry has to build a track record over several years to prove that it can be a good custodian of capital.

“Outside of property insurance, in casualty insurance, we’ve seen a lot of companies reporting prior year developments in some of the older accident years,” he said. “That’s causing reinsurers to look at the balance of their portfolios. Some reinsurers who felt they might have become overweight in accidents have now sought to reduce their accident weighting.

“That doesn’t mean they necessarily felt it wasn’t good for business, but they probably felt they were overly exposed to reserve risk.”

Kilorgy expects the latter topic to come up in the Monte Carlo cybersecurity discussions, especially in light of the CrowdStrike incident. He sees the event as a great opportunity to open or reopen the conversation.

“This gives us a clue that we can ask ourselves how we feel about this loss, was it anticipated, was it priced in, are we managing the accumulation wisely?” he said. “And I think this gives us a good case study – both for the insurance and reinsurance sectors – to consider how we think about cybersecurity.”

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