In a recent Reinsurance News interview at the Monte Carlo Rendez-Vous conference, Mark Pepper, Group Chief Underwriting Officer at Ascot, the specialty re/insurance group, shared his perspective on the upcoming January 1 renewals.
“We have witnessed this over the 25 years that we have been trading and this is continuously reinforced with the latest example being the California wildfires early this year.”
He added that these companies consistently perform better across underwriting, claims adjustment, and risk management, which makes them the kind of partners Ascot wants to align with.
On property catastrophe, Pepper said the company would continue to scrutinise portfolios and ensure that all perils are being charged for appropriately. “The industry has gotten better at recognising these secondary perils: scs, flood, wildfire, etc., although to some regard, we feel that the word secondary needs to disappear as the frequency and severity of these events are really quite profound and, in recent years, have over shadowed peaks perils in terms of dollar insured loss.
“We will be focused on the primary companies underwriting, specifically to underlying cat deductibles and diligent management of regional accumulations of exposure. Both of these factors insulate reinsurers away from day to day frequency losses, which is essential in an inflationary and volatile environment.”
Ascot also intends to maintain discipline around catastrophe retentions, holding firm on attachment levels after successfully pushing them higher in 2023. “We are not looking to lose ground in this regard, given how hard we fought to get these levels increased,” Pepper said.
He also emphasised the importance of monitoring how primary insurers manage cat deductibles and regional accumulations, which he described as essential to protecting reinsurers from day-to-day frequency losses in today’s inflationary environment.
When asked about pricing pressure at the mid-year renewals, Pepper acknowledged that it will be a factor, but said Ascot would be weighing both technical models and long-term profitability. “Having supported many of our clients for a decade or more, the long-term profit and loss statement is really the most telling and revealing statistic.”
Turning to casualty, Pepper stressed the need to keep rates moving above trend. “The years of 2014 to 2019 continue to be a drain on the reinsurance industries performance and so to declare victory in the US casualty market is certainly not appropriate in an elevated legal settlement environment where we continue to witness huge claims verdicts.” He also highlighted the importance of managing line sizes carefully, ensuring a balance between premium and exposure to help counter the risks posed by jury awards.”
Discussing the broader balance between capacity and pricing, Pepper drew a sharp contrast between property and casualty. “The improved market of 2023 was fuelled by a fear to deploy rather than an inability to deploy due to capacity constraints – this makes this market very different from the 2002 and 2006 years hard markets where there was a true lack of capital. This fear has now disappeared, and companies are willing to increases their writings as their balance sheets can cope with more exposure.”
He continued: “However, we do believe that primary companies should buy more reinsurance cover as there are plenty of examples in recent years of the top end of programmes being breached (or close to being breached) in mid-sized events.
“The 2025 Californian wildfires will cost the insurance industry close to $40 billion and that is certainly a sizeable event and one which has threatened the levels of cover purchased for some of the regional and super regional companies. What if this were a $100bn plus earthquake? How would the balance sheets perform post this event – surely this is a case for more cover to be purchased in 2026.”
By contrast, casualty reinsurers remain hesitant. “Some reinsurance companies that had big positions in the 2014 to 2019 years have retrenched and are writing smaller lines today, and we don’t see that trend changing in the foreseeable future.”
He concluded: “In theory, the capital is there as the reinsurance industry is very well capitalised, but that fear is still there as people analyse whether the recent years compound rate increases are enough to counter the nuclear claims verdicts that are still very apparent.”
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