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Insurers and reinsurers, such as Swiss Re and Munich Re, could find themselves in hot water due to record sea-surface temperatures, according to a report from Bloomberg Intelligence (BI).

 These rising temperatures, coupled with a weakening El Niño, pose a significant threat of increased catastrophe claims, potentially outstripping recent price adjustments.

“El Niño didn’t drive above-average cyclone activity in the West Pacific in 2023, contrary to expectations. The region endured 17 named storms (including Dora which crossed the East Pacific dateline). The only year to have had fewer named storms since 1951 was 2010, with 15,” said Charles Graham, senior industry analyst at BI.

“Twelve of the storms became typhoons, including eight major typhoons. Mawar (the first category 5 typhoon of the season) passed close to Guam. Doksuri (the most destructive West Pacific storm in 2023) came close to the Philippines as a category 4 cyclone, before causing heavy rain and flooding in Taiwan and eastern China. Hong Kong still experienced record rainfall and flooding in September and October 2023 in the aftermath of super typhoon Saola, tropical cyclone Haikui and severe typhoon Koinu.”

According to BI, global sea-surface temperatures from April to December reached historic highs since records began in 1850, with the North Atlantic particularly affected by a severe marine heatwave mid-year. The heatwave extended through the Mediterranean basin in July, intensifying over the summer months. The tropical Pacific also experienced elevated temperatures, correlating with the strengthening of El Niño.

These record sea-surface temperatures resulted in above average levels of storm formation in the Atlantic, Eastern North Pacific, and Indian Ocean, leading to hail and flooding in many regions. Meanwhile, the impact on the United States was mitigated by wind shear. Despite the elevated number of named storms—20 in total, the fourth highest since 1950—only Hurricane Idalia made landfall in the US, striking as a category 3 hurricane near Keaton Beach, Florida.

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SCOR has launched a new offshore renewable energy consortium, increasing its deployable capacity to over US$180 million.

According to a Press release, the new consortium, built in partnership with Acrisure Re, indicates its commitment to providing the solutions required to help clients in navigating the energy transition and, at the same, in supporting community and government efforts in decarbonizing economies. Investment in offshore renewable energy has surged, with a strong pipeline of new projects signaling continuous increase in demand.

“Offshore renewable projects will serve as pivotal contributors to global endeavors aimed at furnishing clean, affordable, and dependable energy. It is imperative for our industry to intensify efforts in facilitating such advancements. This consortium epitomizes Lloyd’s market’s commitment to collaboration and provision of vital lead capacity to an expanding market,” said Oliver Paine (pictured), offshore global segment leader at SCOR.

Marie Biggas, chief underwriting officer and active underwriter of SCOR Syndicate and SCOR UK, agreed.

“Sustainability is at the core of our business strategy,” she said. “It’s through the combination of creativity and technical expertise that we continue to be a leader in this space in order to support our partners in meeting their ESG ambitions. It truly is a testament to the reputation and vision of Ollie and his team that this consortium has come to fruition.”

Rebekah Clement, corporate affairs director, Lloyd’s, praised the new consortium.

“This consortium is a great example of how Lloyd’s is collaborating to insure the transition – combining the expertise, foresight and innovation our market is known for to protect the investments and progress being made to build a more sustainable future,” she said.

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Minneapolis-based financial services firm Ameriprise Financial may soon leverage a significant reinsurance deal to reduce its exposure to risks associated with life insurance and annuities, a new report has revealed.

A Think Advisor report suggested the development was hinted at by Walter Berman, the company’s chief financial officer, at a recent conference call with securities analysts.

During the call, an analyst inquired about Ameriprise’s progress in securing a reinsurance agreement for its Retirement and Protection Solutions Division, which deals in life insurance and annuities. This query arises in the context of several life insurers in recent years having successfully reinsured blocks of in-force life and annuity policies, consequently freeing up substantial amounts of cash.

Berman acknowledged the company’s awareness of these trends. He pointed out that the current environment of relatively high-interest rates is narrowing the gap between what Ameriprise is willing to pay for reinsurance and the rates sought by reinsurers. This convergence, according to Berman, presents a potential opportunity for the company.

This potential move by Ameriprise reflects a broader industry trend where insurers are increasingly shifting towards selling life insurance policies and annuities that offer limited benefit guarantees.

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The renewals have resulted in a more balanced market, presenting challenges for new entities aiming to enter under favorable conditions. The equilibrium achieved between the supply of reinsurance cover and buyer demand contrasts with the previous year’s imbalance caused by reinsurers reducing exposure to riskier areas.

According to Russell Merrett, chief underwriting officer at Lloyd’s insurer Inigo, the current market dynamics make it difficult for newcomers to introduce new capacity without significant price concessions. He noted that new entrants need to offer more than just additional capacity to build a viable book of business.

Despite large price increases and coverage reductions secured by reinsurers in 2023, leading to improved profitability, the rate of price rise in the recent renewal period was lower, especially in property-catastrophe reinsurance.

This sector saw an average 3% increase, compared to a 37% hike in the previous year, as per a Howden report. Reinsurers, having avoided substantial catastrophe losses last year, showed confidence in expanding capacity to buyers at the start of 2024.

Mike Van Slooten, head of business intelligence at Aon’s reinsurance solutions division, observed that reinsurers were keen to grow their catastrophe books at prevailing terms during the renewals. The strength in capacity supply was particularly notable in the upper layers of property-catastrophe reinsurance programs, which demand larger losses for payouts.

Global reinsurer capital increased significantly in 2023, reaching $635 billion in the first nine months, up from $590 billion for the full year 2022. This robust capital position, however, does not necessarily indicate a need for new market entrants, as per David Govrin, chief underwriting officer of SiriusPoint.

“I don’t personally see an influx of a lot of capital into new operating companies,” Govrin said.

S&P noted that the industry is still waiting on reinsurers’ full-year 2023 earnings for further insights into the market’s progress. The geopolitical landscape, including regional conflicts and numerous global elections, adds to the uncertainty and potential for rapid market changes, highlighting the need for caution and adaptability among startups in the reinsurance sector.

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Pacific Life Re has announced a significant restructuring of its organizational framework, aimed at enhancing client support and facilitating the company’s growth objectives.

Transitioning from a geographical-based structure, Pacific Life Re will now operate under a product-based management system, focusing on two principal lines of business: protection and savings & retirement.

The restructured approach is designed to enable Pacific Life Re to expand its reinsurance portfolio by addressing client needs across various markets. The global protection business will now be under the leadership of Andrew Gill, an existing member of the executive committee. Gill previously served as EVP for Asia and Australia.

The savings and retirement division, which encompasses the company’s existing work in longevity and global funded solutions (GFS), will be managed by Phill Beach. Beach, known for his role in the development of the GFS business, will join the executive committee as part of this new alignment.

Dave Howell, CEO of Pacific Life Re, commented on the organizational changes, emphasizing their importance and potential impact.

“We have grown tremendously over the years thanks to the strong relationships with our clients. However, we also recognize that the insurance market is constantly evolving, and we need to adapt to meet growing demands,” Howell said.

Howell further elaborated that the new structure would enable Pacific Life Re to utilize its global expertise and best practices more effectively within each business line. Additionally, the restructuring is anticipated to create more career development opportunities within Pacific Life Re, benefiting its workforce.

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US-based home insurance group Hippo has announced the completion of its 2024 reinsurance program.

As part of the program, Hippo has purchased significantly less proportional reinsurance in 2024.

The decision to retain more premium from the Hippo Home Insurance Program and associated non-catastrophe attritional losses on its balance sheet is based on the expectation of continued improvement in the attritional loss ratio and Hippo’s measures to reduce volatility, the company said.

Hippo has expanded its purchase of non-proportional Excess-of-Loss (XOL) reinsurance. The company has increased its per-occurrence XOL limit by 11% and broadened its reinsurer base from 14 to 19 participants.

“Our reinsurance partners have affirmed their confidence in our business with improved terms for the second year in a row,” Hippo CEO and president Rick McCathron said. “Our efforts to reduce exposure to weather-related volatility in our business, combined with our proactive approach to home protection, has continued to drive significant improvements in loss ratio, making the Hippo Home Insurance Program attractive to reinsurers, many of whom have been with us for multiple years.”

Further details regarding the reinsurance placement will be disclosed in Hippo’s fourth-quarter 2023 earnings report scheduled for March 6, 2024, and in the company’s 2023 annual report.

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CHL, the parent company of Conduit Re, has provided a trading update for the January 1, 2024 renewal season, highlighting an increase in business with estimated ultimate premiums written rising by 38% year-on-year.

The company reported that estimated ultimate premiums written for the January renewals amounted to $582.4 million, a surge from the $421.2 million recorded in the same period in 2023. This growth is attributed to strong renewal business with key partners and the addition of high-quality new business.

Conduit Re also observed an increased focus on property and specialty segments, leading to a higher weighting in these areas. Despite this shift, the company maintained a selective approach to casualty lines to ensure stable combined ratio expectations year-over-year. A 3% risk-adjusted rate change, net of inflation, was also reported, indicating a further hardening of the portfolio rate.

The company also announced that it secured its outwards retrocession program, with no significant changes in net Probable Maximum Losses (PMLs) on January 1. In terms of underwriting activities, the breakdown of estimated ultimate premiums written by class of business was as follows:

• Property: $311.0 million (54% of the total, up 58% year-on-year)
• Casualty: $101.4 million (17% of the total, down 10% year-on-year)
• Specialty: $170.0 million (29% of the total, up 52% year-on-year)
• Total: $582.4 million (100% of the total, up 38% year-on-year)

The renewal business January 1 showed an overall risk-adjusted rate change, net of inflation, of 3%. The property segment experienced a 5% rate change, the casualty segment saw a -2% change, and the specialty segment had a 2% change.

Gregory Roberts, chief underwriting officer at Conduit Re, noted the 2024 renewals season was marked by high renewing business levels and positive rates in the property and specialty books.

“We continue to see high submission levels of attractive business and, being selective around lines, rates and structure, we continue to grow the portfolio significantly without sacrificing quality. We saw more attractive risk versus reward in the property and specialty segments and therefore we focused growth in these classes over casualty,” Roberts said.

Conduit Re is set to announce its 2023 year-end financial results on February 21, 2024.

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Chaucer Insurance Company DAC and Chaucer Syndicates have filed a motion in the United States Bankruptcy Court for the District of Delaware, connected to the Chapter 11 bankruptcy proceedings of Vesttoo and its affiliates.

This legal action revolves around Chaucer’s request for permission to submit a late objection to certain claims against Vesttoo Bay XXIV Limited Partnership (“Bay XXIV Debtor”), which are argued to be unenforceable for voting purposes on the bankruptcy plan.

Chaucer has sought to recoup $257 million from Vesttoo.

In filed documents, Chaucer pointed out that it had an exclusive relationship with the Bay XXIV Debtor and alleged that other claims filed against it often lacked a direct relationship or justification for being enforceable.

Aon, Markel, and Clear Blue are among businesses that have sought to claim against the Bay XXIV Debtor, according to filings.

Chaucer argues some claims against Vesttoo Bay XXIV are unrelated and unenforceable

Chaucer’s argument centered on the disallowance of what it said were unrelated claims against the Bay XXIV Debtor, emphasizing the importance of maintaining the integrity of the voting process for the chapter 11 plan.

The motion set out what Chaucer alleged was the unique and segregated nature of the Bay XXIV Debtor’s business and assets, with the insurance company arguing against the inclusion of claims that could be deemed to have direct linkage or were unenforceable.

The request made by Chaucer included several reliefs, such as the authorization to file its objection late, additional time for claimants to file motions if necessary, and procedural accommodations to ensure a fair and equitable resolution of claims in relation to the bankruptcy case of the Bay XXIV Debtor.

Claims against Vesttoo Bay XXIV debtor

Claims against the Vesttoo Bay XXIV debtor, according to the motion filing, include:

• Chaucer filed Claims No. 50821 and 50823 against the Bay XXIV Debtor. These claims relate to damages and liabilities arising from reinsurance transactions, reinsurance contracts, and premium payments
• JPL filed Claim No. 49 against the Bay XXIV Debtor. The stated amount was $3,174,724,832.00, covering advances and reinsurance amounts across all segregated cells.
• Numerous Aon Claims were filed against the Bay XXIV Debtor.
• Proventus filed Claim No. 20159 against the Bay XXIV Debtor. The stated amount was $655,055,007.41, representing Proventus’s aggregate claim against the Debtors collectively.
• Porch Group Inc. and Porch.com, Inc. filed Claim Nos. 50730 and 50794 against the Bay XXIV Debtor. The stated amount was $400,000,000.00 collectively.
• Markel filed Claim No. 20092 against the Bay XXIV Debtor. The stated amount was $146,986,118.42.
• United Automobile filed Claim No. 20240 against the Bay XXIV Debtor. The stated amount was $29,544,211.00.
• Clear Blue Specialty Insurance Company, Clear Blue Insurance Company, Rock Ridge Insurance Company, and Highlander Specialty Insurance Company filed undetermined claims (Claim Nos. 50514, 50563, 50667, and 50746) against the Bay XXIV Debtor.
• Confidential claimants filed undetermined claims (Claim Nos. 20249, 20278, 20282, and 50855) against the Bay XXIV Debtor.

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