Storms unlikely to hit retro prices
Hurricanes Irma and Harvey, which
have caused high losses from wind and
floods in North America, are unlikely to affect
retrocession prices, Arno Junke, the CEO of
Deutsche Rück, told Monte Carlo Today.
Deutsche Rück buys significant amounts
of retrocession on behalf of German public
insurers. In 2016, it retroceded €456 million
($546 million) in premiums.
It buys retro cover for nat cat and fire
and uses a panel of reinsurers to diversify
the exposure of its owners. The reinsurer’s
portfolio structure includes 61 percent property
and 21 percent liability, accident, motor as of
2016-end. Gross premiums written were €1.18
billion ($1.4 billion) in 2016.
“I would be surprised if prices for
retrocession were to go through the roof as a
result of the two hurricanes,” Junke said.
Insured losses for Hurricane Irma for the
US and selected islands in the Caribbean will be
between $20 billion and $65 billion, according
to estimates by AIR Worldwide. Industry
insured losses excluding the US National Flood
Insurance Program (NFIP) from wind, flood,
and storm surge caused by Harvey are expected
to exceed $10 billion.
While losses from the hurricanes may be
significant, Junke thinks the reaction within
the re/insurance industry in calculating
the potential losses was too quick and
The very significant flood losses from
Harvey were not included in models, Junke
said. This needs to be revisited and investigated
more thoroughly, he noted.
Hurricane Harvey unloaded more than
120cm of rain east of Houston, the greatest
amount ever recorded in the Lower 48 states
from a single storm.
“I deem any model-based loss estimates
being made as dubious,” Junke said.
Overall, Junke does not believe that the
hurricane losses will have much of an effect
on the current soft market in P&C. There
continues to be overcapacity in the P&C
market, and interest rates remain low, he noted.
In the past years, investors seeking higher
returns in the low interest rate environment
have been targeting the reinsurance sector,
inflating capacity for cover and pressuring
“The hurricanes or the earthquake in
Mexico are not going to change much,” Junke
said. “It will remain a buyer’s market,” he
“I would be surprised if prices
for retrocession were to go
through the roof.”
UK law firm Bond Dickinson is to combine
with Womble, Carlyle, Sandridge & Rice,
which is mainly based in North and South
Carolina in the US.
“The combination of our two firms will
give us a clear partnership and a combined
office location across the US, which is a very
exciting step,” Jonathan Drake, partner at
Bond Dickinson, told Monte Carlo Today. “We’ve
always been UK-focused until now.”
Drake said that Bond Dickinson had been
looking to expand via an alliance as opposed to
a full merger.
“We’d worked with them in the past, over
a number of years on corporate and other
transactions. We signed the alliance about
14 months ago, but the cooperation and the
culture between the two firms seemed to be a
really good fit.
“Halfway through the alliance process the
“The cooperation and the
culture between the two firms
seemed to be a really good fit.”
idea emerged that it would just make sense for
us to be a combined firm, which would give us
a counterparty that felt culturally similar to us,”
According to Drake there are some overlaps
in industry sectors, but the two firms liked each
other, which in law firm mergers is about 75
percent of the battle, he said.
The combination of the two companies is
scheduled to go live on October 31, with no
direct regulatory approvals being required.
“Ultimately, we wouldn’t be doing this
unless it was good for our clients as well,”
Drake said. “We want to make sure they fully
understand this and we hope they appreciate
some of the benefits that the combination
“Our clients are merging and getting bigger,
and they are looking at their law firms and
other service providers to provide size, scale and
geographical reach. Our organisation is now
twice the size and that should give us the range
and scale to service our clients appropriately,”
he concluded. n
Bond Dickinson unveils US combination deal
18 | MONTE CARLO TODAY | DAY 4: Wednesday September 13 2017 www.intelligentinsurer.com | www.bermudareinsurancemagazine.com