2018 Natural Disasters Not Slowing Down The Reinsurance Market
From the tsunamis in Indonesia to the wildfires that ravaged California, 2018 saw a significant number of natural disasters. While these catastrophes yielded historic losses for insurers and reinsurers alike, the reinsurance market has proved remarkably stable.
According to global reinsurance broker JLT Re, for the reinsurance market, the ability to underwrite risks remains healthy, despite the fact that loss experience for reinsurers in 2018 was particularly high for the property-catastrophe market. Large-scale disasters like Hurricanes Florence and Michael and the flooding in Japan cost reinsurers over $80 billion. Research from JLT Re also shows that last year alone was the fourth most costly catastrophic loss year in existence, following closely behind the record insured catastrophic losses of $150 billion in 2017. With all of these losses, how do reinsurance rates remain so stable?
Peter Chandler, the deputy CEO of JLT Re expressed, “there does remain an abundance of capital and capacity in the marketplace.” He explains that, “it’s really just economics 101. The supply of capital and capacity continues to exceed the demand for that same capital/capacity, and therefore rates are remaining stable, in spite of elevated loss trends. Some of that capital is coming from outside of the industry – CAT bonds, insurance-linked securities (ILS), pension funds, etc.” Chandler goes on to say that, “There was a notion a few years ago that these external capital players would disappear when they experienced their first loss, or interest rates and/or other investments provided superior return opportunities. That has not been the case. Even with interest rates where they are today, this is still an attractive diversification play for external capital to come in and take a bet on Mother Nature.”
“Every situation is unique. Each buyer of reinsurance protection is trying to solve a different kind of problem, and, today, there’s a multitude of ways to solve those risk transfer needs. The reinsurance industry is ripe for efficiency-driven disruption as ever-evolving forms of technology and data afford better educated decisions to be made,” explained Chandler.
Nevertheless, as catastrophic losses continue to mount, reinsurers should be prepared for the possibility of increased reinsurance disputes. Our experienced attorneys have represented reinsurers, cedents, and retrocessionaires in litigation involving a multitude of reinsurance disputes. We have litigated both complex and high-exposure disputes in a range of forums.
We utilize our experience to help our clients across the United States and around the world. We understand reinsurance disputes often are best resolved through creative solutions, but when that’s not possible, we have the experience necessary to litigate the dispute before any tribunal.