RenaissanceRe CEO Kevin O'Donnell remained bullish on the outlook for 2021 renewals as he said that rate increases will be underpinned by rising capital costs, not losses.
Speaking during a (Re)Connect fireside chat, O'Donnell said that the carrier's decision to move forward with a $1bn equity raise in June was taken in a complex environment but that recent trends supported its rationale.
"The assessment we made as to where rates are going seems sound – if anything we have more affirmation of the assumptions we were making," he said.
"We do not change rate based on losses, we change rate based on capital," he continued. "We have an expectation that our capital is going to become more dear from an actual cost and an opportunity cost perspective."
O'Donnell also echoed comments he made when the firm released its second-quarter earnings, projecting that rate momentum will be broad-based and persist for some time.
"We've raised the equity because we see that the opportunity will persist for longer, otherwise we probably would have brought other types of capital in," he explained.
"You don't get to see hard markets too often so you've got to enjoy them when they're here."
Raising equity this year marked the first time the CEO had completed a fundraise that was not linked to M&A deals, which meant "you're telling much more the company story than the story on a transaction", he observed.
RenRe has reported just $104mn of casualty and specialty claims from Covid-19 to date this year, and has not taken any property losses connected to potential BI exposure.
O'Donnell said that the process of managing BI losses was going to be complicated.
"There'll be good news and bad news for the foreseeable future with regard to how these contracts will be interpreted," he continued.
But he affirmed the company's stance that BI claims will largely not be covered by (re)insurance.
"It was not an intended coverage and it was not a coverage that was charged for," he said.
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