ID Podcast: Record reinsurance capacity drives market dynamics: Howden’s David Flandro
Save for a significant loss year, capacity is likely to continue putting pressure on price
Howden’s head of industry analysis and strategic advisory discusses the key themes at this year's Monte Carlo Rendez-Vous
A record level of dedicated reinsurance capital is driving the current softening of the property catastrophe market, Howden’s head of industry analysis and strategic advisory has said.
Speaking on the Insurance Day podcast, David Flandro said save for a significant loss year, capacity was likely to continue putting pressure on price.
However, a large enough loss year, one or two standard deviations above normal, around the $300bn mark, could bring the focus quickly back to perils, Flandro said.
“If we had another year with a Japanese earthquake and a tsunami in an inundation zone next to a nuclear power plant, combined with a bunch of other losses, then pretty soon we'd all be focused only on nat cat,” said Flandro. “But right now, the driver of pricing is capital and capacity.”
Analysts expect reinsurance capacity to reach record levels this year.
A combination of strong investment earning, retained underwriting income and a record insurance-linked securities issuance year has created “an environment of record dedicated capital and very high levels of capacity”, Flandro continued.
“That right now seems to be having a bigger effect on pricing than any one peril, be it primary or frequency.”
Flandro also discussed the opportunity for cedants to regain some of the cover lost during the hard market period, the market’s approach to US casualty and the impact of geopolitical events on specialty lines.
