(Re)Connect Supplement Issue 1

Welcome to (Re)Connect, Insider Publishing’s virtual alternative to the Monte Carlo Rendez-Vous!

Something that has struck me over the past few months is that, bizarrely, despite the lack of commuting, international travel and physical meetings, I seem to be busier than ever.

The relentless series of Zoom/Teams/Webex meetings and the ramping up of the normal day-to-day affairs as we exit crisis mode and start to return to a “business as usual” environment has left many in our industry – myself included – struggling for breath.

This increase in pace and purpose seems to be galvanising change in the industry. Critics of the “normal” Monte Carlo argue it’s nothing more than an expensive festival of hot air – a cushty meeting of industry bigwigs in a beautiful setting to shake hands, down a few drinks and take in the coastal air. It’s really little more than a rather fun boondoggle at which no actual work gets done.

But this year, it’s different. Whether it’s driven by the hardening market, the unknowns of the Covid-19 fallout, an active hurricane season or a combination of all of the above, real business is happening.

A whole host of start-ups, scale-ups and management buy-ins have been announced, buoyed by excited interest from private equity houses, keen to take advantage of a shift in fundamentals that seems to be moving the needle from a hardening to a hard market.

Talented underwriters and brokers are lining up new roles and realigning themselves at new firms ahead of the expected growth market.

The legacy market is having (yet another) moment, as carriers seek to optimise their balance sheets to free up capital to deploy in more opportunistic ways. Recent headlines include RenaissanceRe’s tie-up with Randall & Quilter to reinsure Syndicate 1458 casualty reserves via a loss portfolio transfer, while CNA Financial has appointed Willis Re to advise on a potential legacy transaction for a book of US excess workers’ compensation business.

And a number of reinsurance deals have already been signed.

Last month, Suncorp finalised its 2021 catastrophe reinsurance programme, adding a new aggregate excess of loss (XoL) cover. 

The XoL cover provides A$400mn ($275mn) of cover for events in excess of A$5mn once the retained cost of events reaches A$650mn.

But the transaction that caught my eye was the Sompo International deal.

The carrier purchased a whole account XoL cover offering protection for most of its long-tail book in one of the biggest new casualty reinsurance transactions of the year, as reported by this publication earlier this month.

The 18-month deal provides $25mn of protection across a range of lines of business excess of a $5mn attachment point, and is understood to have covered a huge $2bn-premium portfolio.

It stands out for a couple of reasons: the size of the deal, and the fact that it reflects a change in Sompo International’s buying activity, as it traditionally sticks to quota share reinsurance. The carrier’s executive chairman John Charman also has a reputation as one of the shrewdest buyers in the business, so if he’s going down the XoL route, you can be sure others will follow.

These deals could be a sign of things to come. As the industry turns its attention towards the 1 January renewals, a transitioning market may prompt more reinsurance restructuring than we’ve seen in decades.

This isn’t like 2001 after 9/11, or 2005 after KRW, or 2017 after HIM. This, to use that over-used description, really is an unprecedented time for our market. Best buckle up for a real rollercoaster of a ride.

To view issue 1 of our (Re)Connect Supplement, please click here.

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