Fox: More ‘underwriting conviction’ now than in past decade

As much as $10bn of new capital may enter the reinsurance market as Covid-19 has created a broad-based market opportunity, said TigerRisk Partners CEO Rod Fox.

"We're hearing more conviction in the current underwriting opportunity from institutional investors than we have in 10 years," he said during a fireside chat at Insurance Insider’s virtual (Re)Connect event.

The influx of capital may take various forms ranging from scale-ups of existing entities to repurposing and recapitalisations of franchises, and not all new launches might get done in 2020, Fox noted.

"But they're certainly in progress [and it's] probably more than meets the eye."

The new capital was not just responding to a hardening property catastrophe market, but "huge dislocations" in the US excess and surplus markets, Lloyd's and legacy sectors due to the breadth of uncertainty over Covid-19.

However, as it stands, Fox said he would describe the market stress as "fragile", with rates " hardening but not rock hard".

"Deals are still getting done and there's capacity," he continued. "There is a price, there is capacity, people are working rationally."

Ultimately, the Covid losses will fall in the high-double-digit billions range, possibly more, the TigerRisk CEO projected, even as early reported losses are under $25bn.

The executive said in order to move forward from the pandemic it would require going back to the fundamentals of risk management.

"We've got to try to break that cycle of being reactive instead of proactive."

On the impact of the Aon-Willis merger, Fox said he saw "multiple levels of opportunities" for players outside the consolidated big two.

TigerRisk plans further geographic expansion, including continuing to build out in London as well as hiring to broke new specialty classes of business that it has not participated in previously, the CEO added.

He said it was possible to imagine the top players trying to grab more direct power: "You can see two strategy rooms with large funnels showing business moving directly from broker to capital – eliminating the underwriting process as we know it," he went on.

But capital providers would have to push back against this, he said. "The market has to be careful about the concentration of power."

Nonetheless, digital trading was likely to be more active in the future, including more use of algorithmic portfolio trading, he added.

To view this discussion and other (Re)Connect sessions on demand for free, click here.

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