LINE OF BUSINESS OVERVIEW |
2019 continued to increase pressure on the Property reinsurance market with more typhoons in Japan (Faxai and Hagibis) as well as hurricane Dorian impacting the Caribbean and U.S. The losses in 2019, in aggregate, were not of the same magnitude as the previous two years but once again impacted the market, causing billions of dollars of insured loss, resulting in loss impacted territories seeing positive rate movement.
The UK Prudential Regulatory Authority’s (PRA) ongoing requirement for London based underwriters, especially those operating in Lloyd’s Syndicates, to address poor performing classes with a clear plan for a return to profitability was a key moment, not just for 2019 but for the market’s long-term future. Property was one such class of business which, as we at Barents Re had argued for some time, was in need of greater underwriting discipline in certain sections of the market.
Price increases, reduced lines sizes, increased minimum premiums, increased deductibles and the exiting of certain underperforming occupancies and trades became the mantra for many carriers and Lloyd’s Syndicates. Policy terms and conditions were tightened and more emphasis put on those extensions which may have been providing unintended cover, such as cyber related losses.
The resultant effect was the partial or complete withdrawal by a number of carriers and Lloyd’s Syndicates in many classes of business, notably in international Property. Whilst Property capacity in the London market shrank, capacity from overseas markets remained plentiful, meaning the effect of the PRA’s mandate while positive, was not as extreme as some had first thought, due to the persistent oversupply of international capacity.
In terms of the Property market outlook for 2020, rate increases are expected to remain positive, particularly in D&F. Terms, conditions and deductibles are expected to tighten, with the aim of facilitating a return to profitability for the class. The coming year will also likely see a further reduction in appetite and capacity for occupancies that are considered too volatile or underpriced. it is likely we will look to grow in certain territories where there is the opportunity to do so.
At Barents Re, we will continue to enhance our book of business by maintaining focus on our core underwriting principles to develop a solid portfolio focused on high quality risk protection, favorable loss records and a diverse spread of risk.