Natural selection, Irma style

Hurricane Irma will accelerate and accentuate the forces of natural selection in the reinsurance sector as the claims situation from Florida’s smashing becomes clearer. That was the message from Denis Kessler, Scor’s group chief executive, and Victor Peignet CEO of Scor Global P&C, speaking at their habitual Monte Carlo press briefing.

“The stronger are getting stronger and the weak are getting weaker,” said Peignet. “There is a gradual natural selection at play in the industry, and an elimination of those who cannot bear the situation.”

Kessler continued: “The industry will be shaken by this event. Some players will be heavily involved…some of them will have to exit the market.”

Kessler was wary about being too specific, because of rapidly changing events on the ground in Florida. “It’s too early to say – the wind is still blowing,” said Kessler. “But maybe today’s events will have an effect on the industry’s capital base.”

Peignet suggested that market discussion is already fixating on whether Irma’ track marks another failed attempt to turn pricing for reinsurers. “There’s a certain amount of cynicism in the reinsurance industry, with questions of a near miss,” he said.

The two top men at Scor emphasised the reinsurance group’s diversification as a hedge against the effect of any single catastrophe event. Kessler noted that more than half of Scor’s income comes from the life side of the business, with its geographical spread and range of business lines working in the Parisian reinsurer’ favour.

He also noted the reinsurer’s retrocessional and catastrophe bond protection, while noting that the cat bond market could take a hit from Irma.

“There will be some cat bond exposure,” said Kessler. “The industry is going to be changed. Some of us will suffer a lot, some less, but there is going to be some redistribution. But of course at Scor we don’t fear anything.”

Peignet added: “Boards will be asking a lot of what ifs, such as if Irma had struck the other side of Florida. It could have cost ten times what it might. There will have to be a post mortem examination, for those that are still around.”