In light of this, Andrade was asked by an analyst on the call to provide an update on where Everest sees property cat reinsurance pricing heading into the January renewals.
Expanding on his opening remarks, Andrade said: “What I said in my remarks is that we expect firming to take place at the 1.1 renewals, and we see that. And I think you’re right, that when we were all in Monte Carlo, not too long ago, the talk was probably that pricing could come down somewhere around minus five, minus 10 for US property cat, etc, but I think there’s a few things that have changed since Monte Carlo, similar to what happened in 2022 post Ian,” said Andrade.
He continued: “We had two major storms hit the United States, in Milton and Helene, within essentially a week of each other. And I think that certainly sets the perspective on what’s happening out there, right. I mean, we’re seeing rapid intensification, we’re seeing very powerful storms, etc. So, that’s the US component.
“The other part of it is Europe, right. So, the thought process in Europe was also likely that things were going to be probably down minus five, etc, but you have the floods that took place this year, last year, now we have storm Boris in the third quarter, et cetera.
“So, our thinking is that pricing is likely to go up plus five, plus 10, both in the US as well as in Europe. And you know, ultimately, we’ll see at the end of the day when the dust has settled. But I know our teams are actively quoting right now, and we’re actively engaged in that renewal process.”
Building on the CEO’s comments, Group COO Williamson confirmed that it’s still very early in the process and so Everest is not at firm order terms yet, with the expectation that negotiations will go “down to the wire”.
“But if you step back for a minute and think about some of the fundamentals, some of the things Juan touched on,” said Williamson. “First of all, it’s been a very active cat quarter. Now, it has been a little less active if you’re a reinsurer than if you’re a primary, but the fact is, the losses are in the system. It’s an over $100 billion year, again. We’ve had several major hurricanes, and the most recent one, while I think not as bad as people had feared, I don’t think it takes a lot of imagination to recall that if it shifted to the north and hit Tampa, it would have been a much larger, maybe 2x or more type of event. So, that’s in everyone’s mind.”
Another critical factor, according to Williamson, is that demand for reinsurance protection is “rising quite substantially.”
“We’ve already had a number of conversations with core clients who are looking to buy more. So, that is certainly a factor,” he explained.
“And then, lastly, I would say, our clients in particular are looking to buy more from Everest. I mean, the quality of our capacity is second to none. And I think that just peaks that demand for our paper. Something north of a third of our North America cat deals have non-concurrent terms, which I think will be very favorable for us as well. So, I think all of that ladders up to a situation where we think rates will be firming, and we think expected returns will be very strong,” continued Williamson.
In the firm’s results announcement, Everest revealed that it is anticipating losses from hurricane Milton, net of estimated recoveries and reinstatement premiums, to be between $300 million and $400 million, based on an industry loss of between $25 billion to $35 billion.
During the call, Williamson was asked whether the potential Milton loss will have an impact at 1.1 as well as the mid-year renewals, given the European focus of the January renewal season.
“I think it absolutely has a 1.1 impact,” said Williamson. “Now, clearly, it’s going to have more of a 1.1 impact on diversified US cat programs than it would on a program in Europe. Europe’s got its own problems, obviously. So, there is going to be some differentiation based on where in the world the program is. But I think for all US programs, they all have a variety of southeast exposures, and I think the fact that there is this intensified hurricane activity and the near miss, I absolutely think it’ll weigh on pricing.”
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Publish date : 2024-10-31 08:13:00
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