Reinsurance will stand up to Irma – JLT Re

Catastrophe events in the US are ongoing, as Irma continues to batter Florida and Houston remains flooded, but reinsurance will stand up to the storms and do its part.

That was the message from the top executives at reinsurance broker JLT Re, speaking at their Monte Carlo press event at this year’s RVS event.

JLT Re global CEO Mike Reynolds said: “There is no doubt that we are going to see a bit of recalibration. We are going to see winners and losers. Our point is that the market is robust. The market is going to stand up to this test.”

On whether the event is big enough to finally halt years of soft market pricing, Reynolds was noncommittal, noting $60bn of excess capacity in the market. “We’re only halfway through September, remember that. There’s still a long way to go,” he added.

JLT Re executive chairman Ross Howard said: “The reinsurance market needs to stand up. It’s time for the re market to show why it’s in place and the responsibilities it has. What we do know is that we’re going to look after our clients.”

Howard made a comparison with the carnage wrought by Hurricane Andrew, which struck south of Miami in August 1992. Irma looks like being comparable in its effects on the ground, but Howard suggested the industry would react better this time.

Howard said: “Hurricane Andrew surprised a lot of reinsurers with the intensity of losses in small areas of Florida, caused a lot of problems with recoveries. The market today is better positioned. The reinsurance business is better capitalised and safe to respond to these situations as ever it was.”

“People say the ILS market has never been tested but actually it has, this is just more of a headline grabbing opportunity.” - JLT Re North America CEO Ed Hochberg

Florida is more dependent on reinsurance than any other place in the world, noted JLT Re North America CEO Ed Hochberg, adding that he expected the industry would do its part during the ensuring clean up period.

Hochberg said: “We believe that reinsurers will by and large stand up, pay their claims quickly, be there for renewals and for any other coverages people need. The industry has never been better positioned to respond to something like this. I’m very optimistic as to how the market will respond.”

JLT Re said its own role, in dealing with the aftermath of hurricanes Irma and Harvey, would be greater than ever before, since the reinsurance broker has invested in its US business over the past couple of years, boosting its volume of its US placements. The firm has also been busy hiring in London and for its new office in Stockholm.

JLT Re global head of analytics David Flandro said: “JLT Re is better equipped than ever to respond to this, demonstrating that we are a full-service property and casualty specialty reinsurance broker,” adding that the broker had been ahead of the pack in predicting a strong likelihood of a Florida landfall for Irma.

Hochberg noted that JLT Re has also invested in its private transactions business, noting that collateralised reinsurance placements “can be done quickly and quietly, at a fraction of the cost [than traditional reinsurance]”.

Responding to a GR question, Reynolds said he expected the insurance linked securities (ILS) market to respond to Irma just as effectively as the traditional reinsurance players. “ILS is an integral part of the overall reinsurance market,” he said.

Reynolds continued: “I don’t see why it won’t respond in the same way as traditional market. I think everybody is going to step up. We don’t really have particular concerns about any particular market – traditional or ILS. Is it an opportunity to test that thesis? Sure, let’s find out.”

Hochberg said he was bullish that ILS market will perform appropriately. “People say the ILS market has never been tested but actually it has, this is just more of a headline grabbing opportunity. ILS is an integral part of programme; it’s here for a reason; and it’s collateralised, so payments should come quickly,” he said.

Speaking to GR, Flandro said he thought Harvey was the more unpredictable loss event of the two storms. “Flood is the real wildcard. The loss ranges are huge. We’re going to continue putting a lot of investment into our analysis,” he added.