TUESDAY
17.10.17
News
The bottom of the cycle has been reached
Sompo International remains strongly
would be determined by the overall impact of
the losses, saying that information as to the exact
losses was still developing as companies assess the
damage. Any eventual rate changes would also
rely on the individual relationships within the
market.
He also stressed that the market was seeing a
return to discipline after what had been a long
period of rate softening, which he welcomed.
According to Bigley, the forthcoming rate
increases will not be confined to property
business, but would be more broadly applied
than that. The California wildfires were being
watched carefully. Some early estimates have
suggested losses could be at least $2 to $5 billion.
He also stated that the year had seen some
extraordinary weather events, pointing to the
landfall of what had been Hurricane Ophelia on
the southwest coast of Ireland as being a good
example of that. n
positioned in the market, despite the losses
from natural catastrophes that have hit in the
third quarter of the year, David Bigley, executive
vice president, chief underwriting officer and
head of global catastrophe reinsurance at the
company, told PCI Today.
“We’re well positioned with a strong balance
sheet,” said Bigley. “We’re expecting some
differentiation in the loss experience of our
clients and some changes in the marketplace
before the 1/1 renewal season. We had reached
the bottom part of the cycle,” he said.
Bigley added that he thought the recent string
of natural disasters in the forms of hurricanes
Harvey, Irma and Maris, along with the
Mexican earthquake and the ongoing wildfires
in California, will be enough to turn the market
after its prolonged bout of softness.
He added that the nature of the rate changes
David Bigley
Sentiment is positive but headwinds challenge growth
While the industry is well capitalised and
market sentiment mostly positive, there
is still evidence of economic and market-based
headwinds that will challenge profitable growth,
according to a study by Guy Carpenter.
In the 2017 edition of the annual
report, Plotting a Path in a Changing Market, Guy
Carpenter outlines a dynamic insurance industry
facing a changing economy and pressure in oncestable
lines, but with opportunity for those with
management skill and understanding of risk.
“On the surface, 2016 represented a recordsetting
year for the P&C insurance industry, with
surplus reaching its highest level in history. Rate
reductions continued to moderate, and there was
optimism following the 2016 election given the
potential for tax cuts and deregulation.
“Yet red flags remained, and a closer look at
the individual metrics contributing to the growth
in surplus revealed interesting trends,” said Tim
Gardner, president of North America for Guy
Carpenter.
The report, which is produced through Guy
Carpenter’s ongoing Insurance Risk Benchmarks
analysis of vast amounts of market data, focuses
“On the surface, 2016
represented a record setting
year for the P&C insurance
industry, with surplus reaching
its highest level in history.”
on risk and performance of US property/
casualty insurers.
In 2016, emerging risks, catastrophe
frequency and severity and shifting capital
needs all contributed to a 0.4 percent industry
underwriting loss, its first calendar year
underwriting loss since 2012.
Reduced margins and adverse development
reflect a competitive environment supported
by excess capital levels, direct written premium
growth slowed and higher realised and unrealised
capital gains were skewed by the performance of
some large companies who use underwriting cash
flow to fund investments.
The average large property/casualty carrier
saw its accident year loss ratio increase by 2
percent from 2015. The auto segment posted
losses due to both frequency and severity shifts.
Only 10 and 30 of the top 100 personal auto and
commercial auto writers, respectively, made an
underwriting profit in 2016.
The personal auto losses came to a line
normally considered the cornerstone of
profitability. The industry’s accident year loss
ratio increased from 62 percent in 2013 to 67
percent in 2016, and its 10-year run of favourable
prior period development ended.
“The personal auto losses forced smaller
companies to rethink strategy and mix of
business as the large writers continued to engage
in the predictive modelling and marketing war,”
added Julia Chu, managing director at Guy
Carpenter.
In addition to the report, the Risk Benchmarks
Statistical Supplement provides more detailed
trend, state and market segment data for
actuaries and capital modellers, and is available
to clients upon request. Guy Carpenter’s
BenchmaRQ® Advisory Services and Strategic
Advisory practice can customise client-specific
analyses using data and information from the
Risk Benchmarks research. n
18 | PCI TODAY | DAY 3: Tuesday October 17 2017 www.intelligentinsurer.com | www.bermudareinsurancemagazine.com