One tree does not make a forest.
At the Bermuda Risk Summit last week there was a variety of analogies used to underscore the need for a sustainable approach to doing business in light of the record-breaking results delivered by several reinsurance companies.
The success enjoyed by Hiscox Re & ILS – which posted a record profit of $221.4 million in 2023 and an undiscounted combined ratio of under 70% – was a result of its focus on underwriting profitability and building a robust portfolio noted CEO of the Hiscox unit, Kathleen Reardon (pictured centre, right), during a panel discussion on ‘Putting Capital to Work’ at the Bermuda Risk Summit. The whole industry needed these 2023 results, she said, not only to build more confidence with shareholders but also with employees and clients.
2023 was also a great year for Everest Group which celebrated the most profitable period in its history and delivered a total shareholder return of over 26% for the full year. Peter Bell (pictured centre, left), CEO and managing director of Everest Reinsurance Bermuda noted that Everest’s Reinsurance business had done a lot of work over the last five years to strengthen its portfolio. The business is facing into a solid market across many lines of business, he said, and it’s well-equipped to lean into these market conditions and take advantage where it sees opportunities.
It was also a good year for the market, affirmed Paul Simons (pictured, right), CEO of Convex Re Ltd – which is soon celebrating its fifth anniversary – but he cautioned that while success should be celebrated and rewarded, it’s important to remember that conditions in the reinsurance market have been difficult for a number of years.
“Investors have not been happy and one year does not make up for many years of a lack of profitability, and us not fulfilling our promises to our shareholders,” he said. “So, that’s our focus and it’s going really, really well… For us, it’s [about] sticking to the knitting.”
Aspen’s executive chairman and group CEO Mark Cloutier (pictured centre) shared that 2023 saw the business deliver its third consecutive year of significantly improved results, achieving a combined ratio in the mid-80s. Aspen is now in a very healthy position after a few years of struggling in the late teens, he said, which can be accredited to the hard work done by its team.
“Going forward,” Cloutier said, “I would argue that we are achieving the level of returns that we should be achieving in order to take the risk that we’re building our shareholders’ capital on. So, [it’s about] how we see that capital that’s being generated today, through this great round of results across the industry, how we see that being managed.
“And in some respects, it’s pleasing to see big dividends and big share buyback announcements because that could be the most prudent thing to do given the supply and demand equation that we’re in because I think it’s a healthy moment for us.”
John Huff (pictured left), CEO of the Association of Bermuda Insurers & Reinsurers (ABIR) and moderator of the panel noted that Cloutier’s view of the market correlates with what he’s hearing – that Bermuda capital and capacity has never been more coveted, and that capital is being deployed wisely. But 2023 was last year, he said, and the focus now is 2024. So what are the biggest opportunities in the market today, he asked the panel, not just in property and casualty but also in specialty lines and other product suites?
Without zeroing in on specific lines or classes, Cloutier said, he believes the opportunity in front of the market is that, if companies are run well, they can use current trading conditions to strengthen their balance sheets and build greater sustainability and resilience. With that done, he believes the market can get back to doing the business it should be doing all the time but all too often isn’t.
“With those healthy platforms, and particularly in Bermuda with our ability to use the ecosystem here,” he said, “we should be searching for ways to combat under-coverage and coverage gap situations, and use our deep experience to find new products and risk solutions for risks that we know are out there, that our industry understands and gets scared away from, conceivably.”
Cloutier noted a need to reapproach some of the opportunities out there to help solve some of the economic pressures that are occurring across some of the sector’s largest markets around the world. The “herd mentality” of the market means that when it’s struggling to understand what’s going on with certain secondary perils, it can tend to pull away from them, he said, leaving the consumer under-covered.
“If we’re healthy, if we have a strong balance sheet and certainly have capital that we can intelligently deploy, we should be able to go back into some of these lines and classes in business in a way that can solve for the societal need, but at the same time, do it in a properly thought out way,” he said. “[…] Of course, there’s new emerging risks as well. So, I think there’s an opportunity to have almost a form of renaissance if we, ourselves, are healthy first.”
