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The January reinsurance renewal season saw reinsurers maintaining sufficient capacity for casualty programs amid concerns over social inflation and the need for reserve strengthening, as revealed from the latest AM Best commentary.

The report, titled “Despite Heightened Risks, Casualty Reinsurance Renewals See Modest Price Changes,” highlights that reinsurers have kept a disciplined approach to underwriting, particularly in comparison to more volatile property covers. This discipline is also evident in the stability of attachment points and terms and conditions, which are not expected to ease in the near future.

While property catastrophe reinsurance has experienced several price hikes due to an increase in the frequency and severity of weather-related events, reinsurers have shown reluctance to increase capital allocations to these risks until they see more evidence of rate adequacy.

This cautious stance contrasts with the dynamics observed in casualty reinsurance, where reinsurers are carefully balancing their portfolios amid the challenges posed by long-tail risks such as general and commercial auto liability.

Impact of social inflation

The commentary points out that economic and social inflation trends, fueled in part by third-party litigation funding and sophisticated plaintiff attorney tactics, are driving up judgments and affecting lines like commercial auto, general liability, and directors & officers (D&O) liability insurance.

These factors contribute to a landscape where social inflation continues to exert upward pressure on loss costs, with third-party litigation funding delivering high returns uncorrelated to other financial assets.

The commentary also took note of the impact of social inflation on the insurance industry, particularly in sectors like commercial auto, where loss experience remains challenging. Despite consistent rate increases over the past decade, pricing has struggled to keep pace with escalating loss trends, further straining reinsurance pricing.

The analysis also touches on deteriorating driving behaviors since the onset of the COVID-19 pandemic, including increased road fatalities despite fewer miles driven, and the rise in distracted and impaired driving. These trends have led to more severe injuries and litigated claims, amplifying loss severity through punitive damages awarded by sympathetic juries.

This environment has resulted in higher costs for excess of loss reinsurance on individual claims and has challenged the commercial auto sector, which saw underwriting losses in 2022 reminiscent of the 2016-2019 period, with third-quarter 2023 results showing a continued decline.

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Insurtech managing general agent (MGA) Loadsure has unveiled Columbia, a new insurance product designed for the logistics industry, emphasising the use of data to enhance coverage for small and medium-sized enterprises (SMEs).

Columbia offers comprehensive insurance solutions, specifically catering to motor carriers, freight brokers, and freight forwarders, with a focus on covering potential damage to cargo.

The coverage provided by Columbia extends beyond the primary insurance agreement to include various supplemental protections. These additional coverages encompass business personal property, contingent coverage for unforeseen liabilities, contractual penalties, debris removal following an incident, extra expenses incurred during the claims process, freight charges, and shipping containers.

The new proposition leverages advanced data analytics and digital technology to streamline the insurance process for wholesale brokers. This approach enables brokers to quickly and efficiently quote and secure coverage, featuring an automated system for quote generation, policy binding, and document management.

Johnny McCord, CEO and founder of Loadsure, commented on the launch, highlighting the significance of data-driven solutions in advancing the insurance industry and addressing the coverage needs of SMEs within the cargo and freight sector.

“Backed by our industry leading expertise, Columbia will empower brokers to better serve cargo outfits seeking long-term partnerships and the solutions needed to support their businesses,” McCord said.

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Brookfield Reinsurance has outlined its financial results for the quarter and fiscal year ending December 31, 2023.

Key achievements for 2023 included generating $8 billion in annuity sales, with significant contributions from the retail annuity platform, flow reinsurance premiums, and pension risk transfer (PRT) premiums on the North American PRT platform.

The acquisition of Argo Group for approximately $1.1 billion also marked a significant expansion of Brookfield’s US property and casualty (P&C) operations. Additionally, the impending acquisition of American Equity Life is expected to add over $50 billion in insurance assets to the company’s portfolio.

Investment strategies deployed throughout the year yielded returns above 9%, enhancing the gross yield across the portfolio to 5.6%. The company also noted a substantial increase in its equity base and market capitalization, achieved through a successful public exchange offer that did not dilute the holdings of Brookfield Corporation or Brookfield Reinsurance.

Brookfield Reinsurance financial results

Financial performance for the year showed distributable operating earnings (DOE) of $745 million, up from $388 million in the previous year, driven by increased net investment income and the impact of new annuity business. Net income also saw growth, with figures reaching $797 million for the year, compared to $501 million in the prior year, bolstered by DOE contributions and favorable market movements.

Brookfield Reinsurance also reported a strong liquidity position, with approximately $27 billion available across corporate and subsidiary investment portfolios. The forthcoming acquisition of American Equity Life is expected to further enhance liquidity, supporting the transition to higher-yielding investment strategies.

In a strategic move to bolster its balance sheet and market presence, Brookfield Reinsurance also completed a successful exchange offer in November 2023, increasing its publicly traded share base significantly. This initiative enhanced the company’s equity base and market capitalization.

The board has declared a quarterly distribution of $0.08 per share across various classes, aligning with the distribution schedule and amount of Brookfield Corporation. This distribution is slated for March 28, 2024, to shareholders on record as of March 13, 2024.

“Our strong results for 2023 reflect the continued growth of our annuity sales platform, our broadening credit origination capabilities, and the repositioning of recently acquired assets that have contributed to increased investment returns. As we enter 2024, we continue to focus on scaling our business in a disciplined manner, focusing on our competitive advantages to grow our core business lines and delivering strong risk-adjusted returns,” Brookfield Reinsurance CEO Sachin Shah said.

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PartnerRe and its subsidiaries have maintained its superior rating, bolstered by the group’s solid operating performance, highly favorable business profile, and effective enterprise risk management strategies, it was stated.

AM Best has maintained the Financial Strength Rating (FSR) of A+ and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” for the company and its operating subsidiaries. Additionally, the Long-Term ICR of “a-” (Excellent) for Pembroke, Bermuda- based firm, has also been affirmed. These ratings have been assigned a stable outlook, indicating a steady projection for the future.

The affirmation of these ratings by AM Best underscores PartnerRe’s robust balance sheet, described as the strongest by the rating agency.

The ratings come in the wake of solid performance and capital stability, even as the company transitions to a new ownership structure under Covéa Coopérations (Covéa Coop). It has announced the impending retirement of its president and CEO Jacques Bonneau, with Phillipe Meyenhofer stepping in as the new CEO and Jon Colello as the new president. Both Meyenhofer and Colello are currently serving in executive roles within PartnerRe.

The first three quarters of 2023 saw PartnerRe benefiting from lower catastrophe-related losses, enhanced investment returns, and favorable pricing dynamics in the property reinsurance market.

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The Fortegra Group, a multinational specialty insurer, has confirmed the withdrawal of its previously announced initial public offering.

Fortegra is a subsidiary of Tiptree Inc. In a news release, the insurer said that it was withdrawing the registration statement relating to its IPO due to “prevailing market conditions” and the “high value” placed on its growth prospects by Tiptree and Warburg Pincus.

“Tiptree and Warburg remain committed to supporting Fortegra as it continues to execute its growth strategy,” Fortegra said in the news release.

Tiptree originally announced plans to take Fortegra public late last year. Tiptree, which planned to retain majority ownership of the insurer, said in November that any proceeds from the IPO would be used to support Fortegra’s growth.

Fortegra is based in Florida and has 15 locations across the globe. Last month, the company announced the appointments of Eric Halter as senior vice president for business development and Bianca Hoshina as chief reinsurance buyer.

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As a 160-year-old company operating in every insurance market around the world, Swiss Re has a 360-degree vantage point of what’s happening in any specific sector or business line at any given time. In his three decades serving with the re/insurance behemoth in a variety of roles, Russell Higginbotham (pictured) has seen first-hand the amount and the quality of knowledge and data this provides – and it was with this in mind that Swiss Re’s Reinsurance Solutions division was established.

Now a year into his tenure as CEO of the division, he noted that its ultimate aim is to commercialize the organization’s risk knowledge assets and deliver them to other members of the re/insurance ecosystem and beyond, with clients including brokers, MGAs, governments and property fund managers. It’s an ambition that closely aligns with Swiss Re’s mission and purpose, he said, which is to make society as a whole more resilient.  

Utilizing data to bridge the global protection gap

At its core, insurance is an intangible proposition, based on a promise to pay and trust is at the heart of this offering. It’s much the same with data, especially as data becomes more widely available and accessible because if it’s not used ethically, then people will be less willing to share it and regulators will impose greater restrictions on its use.

“There’s this great opportunity to improve societal resilience, to close the global protection gap and to get more insurance into the hands of the right people in the right way,” Higginbotham said. “But as insurers and reinsurers, we have to make sure that we do that properly, otherwise that opportunity will become much more narrow. So I think it’s on us to almost self-regulate around that.”

Speed and efficiency – the twin demands of data

Speed is the first consideration, Higginbotham said, because people want things done faster. But while underwriting and issuing a policy in real-time sounds relatively straightforward, it simply doesn’t happen that way for a lot of products.

Alongside the demand for speed is the appetite for increased efficiency, he said, as firms want to make more accurate decisions, based on better data optimization. That supports them looking across their books of business and understanding in detail how they are performing, where the issues are and where the opportunities lie. Having this more granular clarity on their business is what supports growth because it unlocks more insights into new areas for growth, whether that’s a market, a geography or a product.

“With better quality data, you’re then able to build a strategy around that with greater understanding and confidence,” he said. “Ultimately, all of these things make insurance more accessible, more affordable, and more profitable in combination. It’s about trying to find the right balance for growth – people need to be able to see products that they want and products that they can afford, and insurance companies have to be able to provide that. So, it all comes together quite neatly.”

Understanding the connection between digital advancement and resilience

The link between digital advancement and general resilience is clear from the outcome of using the right data in the right way, Higginbotham said, however, it’s not just about the data itself but also the interpretation of that data to allow companies to understand and price risk more accurately and more efficiently. Because, as an insurer or reinsurer, you have to charge for uncertainty because without knowing how a risk will perform, you need to build safety margins into your pricing and allocate more capital to that risk.

“So, ultimately, you have to be more conservative around that risk because of uncertainty,” he said. “But if you take elements of the uncertainty away, to increase accuracy and understanding, it builds a much stronger foundation for solutions development, because you can do it with confidence. Essentially, if you know how your car’s going to perform, you can go faster. That’s what data gives you the potential to do.”

How is the insurance market responding to this offering?

Assessing how the market is responding to this opportunity, he noted that reinsurers and insurers have been on a data enrichment journey for some years now. The pandemic accelerated interest in this area, he said, because companies had to find different ways to conduct their business and support their customers. What might previously have been labeled as ‘innovation’ or  ‘competitive advantage’ simply became table stakes for swathes of the market, because to be without these capabilities was suddenly a competitive disadvantage.

“Naturally, there is always going to be more to do,” he said. “But the fundamental challenge, which hasn’t changed, is that not enough people and businesses have insurance cover. Either they don’t have it at all or they don’t have the right cover, or they don’t have the right amount. And the environment we all live and work in is increasingly uncertain and we all have to make sure that insurance is there to play its role in societal resilience.

“Ultimately, the role of insurance is to provide a safety net when all the other forms of mitigation that you have don’t work. That hasn’t changed, rather I think the advent of data and technology just allows that to continue to happen. And I believe that the insurance industry is fully embracing that now because it has to. If you want to be competitive in the future you have to be operating on that level or you’re going to find yourself becoming increasingly uncompetitive.”