The time for people who re-watch the horrors of disaster may be over: AM Best – Artemis.bm

The era of high-risk breeders appears to be over, rating agency AM Best announced today, as returns continue in some areas, while increasing business among US and Bermuda cat professionals. companies.

AM Best explained in a recent report that disaster-affected areas around the world are still facing challenges, while insurance and insurance are not as plentiful as they used to be.

There are, “Obstacles in some areas, especially in the environmental hazard programs, the coverage covers, and the most dangerous areas in the US,” AM Best explained.

One of these drivers has been re-insurance against natural hazards and exposure to climate change due to weather damage.

This, on top of concerns about inflation and lawsuits in areas such as Florida, has caused the markets to lose the strength they have experienced in recent years, as reinsurers focus on diversification.

Some of the world’s largest insurance companies continue to grow their property and casualty recovery books, but these are companies with global presence and diverse businesses.

For many insurance brokers who were once seen as catastrophe experts, they are turning into a different approach, as they look to manage the impact of major catastrophic events on their businesses.

Even though premium rates for financial insurance are on the rise, due to the large increase in recent reforms, the risk of cats continues to rise.

“US and Bermudian (re)insurers are focused on expanding their specialty and casualty areas, particularly
in more and more (E&S) markets, where prices are observed and price losses,” AM Best says.

Even a few other companies have announced their plans to scale back, or stop listing cats altogether.

Which leads AM Best to say, “The era of problem-focused recovery seems to be over.”

However, “There is potential to focus on catastrophes in the insurance-linked (ILS) and retro markets,” the rating agency adds.

Although several US and Bermudian reinsurers counted cat risk as their main business a few years ago, now, “Many of these companies have changed their divisions and are no longer dependent on the casualty business or have acquired and now operate as part of a larger and more diversified insurance business,” AM Best says.

Of course, the days of the dedicated disaster-focused reinsurance reinsurance business that used to be a full-time business model, with matching records, are long gone.

Many US and Bermudian reinsurance companies have been using capital markets and insurance-linked securities (ILS) to enable them to hold large cat groups, perhaps by managing third-party capital themselves, in partnership with large ILS funds. investors, or use reinvestment as a means of ensuring that they show good results.

Were these reinsurers traditional at all, with their hybrid approach of getting money from different sources to help them write? Maybe not.

The challenge is to find enough global cat opportunities to create a diversified portfolio that is not a US wind game, and to use the best funds to underwrite the risk at a level sufficient to generate returns through the traditional reinvestment process. .

The highly transparent hybrid strategy, backed by a licensed insurance carrier, has served some in the ILS market well, suggesting that the era of disaster recovery is almost dead.

But the traditional type of reinsurance that helps in the event of a disaster is long dead, with the increase in third-party payments to reinsurers being one driver that has helped keep the brand alive for longer than expected.

Catastrophic damage and frequent weather disruptions have been a major killer of popular disaster-focused games.

Of course, we expect, since the method of financing that focuses on catastrophes may die completely, the use of third-party funds can help different insurers to advance the risks that can be more profitable for them, if they are managed well and diversified. risk/region as well.

So while for now we may see some reinvestment companies moving away from the cat risk, there is a chance that they will be showing their businesses again as prices rise. But it’s probably the biggest support from both managed and third-party investors.

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