Greenlight to benefit from market turn
The hurricanes that have made landfall
in the US will have “scared the living
daylights” out of some market participants as
much because of their potential scale rather
than the actual losses. But that could lead to
third party investors being more selective about
which carriers they work with in future.
That is the view of Brendan Barry, chief
underwriting officer, Greenlight Capital Re,
who told Monte Carlo Today that the reinsurer
stands to benefit from an improvement in
pricing in the industry generally as it has little
exposure to catastrophe risks in Florida where
the majority of losses are likely to occur.
Barry said that while he does not believe
capital markets investors will flee in the wake of
losses, some could become more discerning as
to who they work with.
“I do not believe big losses will send investors
running. When you look at the size of some pension
funds, a $50 billion loss is just a bad morning to
some areas of the capital markets. In contrast, this
could be a meaningful event for reinsurers.
“But it may serve to separate the good
operators from the bad on the underwriting
side and investors may become more selective
about which carriers they work with,” he said.
After some tough years for the Caymanbased
reinsurer, formed in 2004, Barry said
the company is back on track now thanks to
changes it has made to the portfolio in recent
years, starting in 2012, which resolved some
unprofitable lines it wrote in 2009/2010. It put
a poorly performing commercial automobile
book into run-off and exited a book of
construction defect contracts for which it
bought a loss portfolio transfer to cover any
future claims in 2016.
On the back of these changes, Barry said,
the portfolio has been steadily improving and
he expects the book’s overall combined ratio
to be close to the mid-90s this year. It has
refocused on its core lines, which include nonstandard
auto, accident and health, financial
lines, medical stop loss and a limited amount
of cat business.
He believes the company has a stable and
loyal client base. He said the company has
formed deep relationships with many of its
clients where it will supply capital to them in
the form of equity or debt investments as well as
through more traditional reinsurance support.
“We are not that big and we are not in every
corner of the market. But that is by design,”
he said. “We have a good set of clients and we
participate in their capital structures in some
instances in a number of different ways. We
also offer support around things such as data
analytics. A lot of reinsurers only think inside
the box but we are agnostic about how we
supply capital to our clients and we form very
good relationships as a result.”
Coming back to a potential change in
market conditions, Barry believes the reinsurer
is well placed now to benefit.
“We have kept our tinder dry from losses.
We do not anticipate a big change in the market
but we do think that losses will highlight the
lack of profits in the industry and there will be
a change for the better as a result.” n
NFIP reform could pave way for private market to participate
With the National Flood Insurance
Program (NFIP) up for renewal, the
US flood market could be ripe for the private
market to step in—and there is strong interest
in this, as Bill Churney, president of AIR
Worldwide, told Monte Carlo Today.
The US Congress has extended the deadline
to renew or repeal the NFIP from September
30 to December 8, 2017. Churney believes it is
leaning towards more substantial reform, which
could pave the way for greater private market
“From every client we talk to, there is strong
interest in that,” said Churney. “The capital is
there. AIR has a full probabilistic inland flood
model, so the analytical tools are there. The
data is there. It is ripe for the private market
to step in.
“You could argue that for some policyholders
the NFIP product is too attractive, in that
the rates are criticised because they’re not
actuarially sound, and there are a lot of repeat
losses with the NFIP, so there would be a need
for better pricing of the risk.
“If there’s more insurance take-up then
hopefully that risk would spread more effectively.”
Any time there is a major loss such as
Harvey, Churney noted, when you’re dealing
with upwards of $65 to $75 billion in damage,
it’s going to shine a spotlight on the fact that
the NFIP can’t afford that. That triggers an
opportunity for the US government to act and
the private market to fill the gap.
The matter of underinsurance of cat risk
in the US is a big problem that people are
becoming more aware of, he said. “No matter
where you look in the US, coverage for flood
insurance is extremely low.
“We often talk about the protection gap, and
it’s often thought that it’s an issue for Asia.
“Well it’s a huge issue for the US; we would
estimate that less than 50 percent of the cat risk
in the US is insured,” he concluded. n
8 | MONTE CARLO TODAY | DAY 3: Tuesday September 12 2017 www.intelligentinsurer.com | www.bermudareinsurancemagazine.com