Having spent the last few days in Miami for what is regarded as the local market’s version of the Monte Carlo Rendez-Vous, it seems strange that I have walked away with more questions than I arrived with.
After repeatedly traipsing up and down Brickell Avenue meeting with the local market, it’s clear that there is considerable optimism surrounding the upcoming renewals from both brokers and underwriters. There is an acceptance that pricing for many lines of business could probably do with some correction, and that certainly continues to be the case for catastrophe exposed risk in the region.
Admittedly, that is true across the entire global (re)insurance space, but it seems that is especially the case in Latin America. While it now appears the market has got a better and more accurate understanding of its exposure to Hurricanes Irma and Maria, the question now is what can be done to ensure that similar devastation is not wrought next time such a storm hits? Also, how can companies be better prepared for the losses associated with a hurricane of that magnitude?
In the aftermath of Hurricane Maria hitting Puerto Rico, it became clear that some local insurers did not have sufficient financial protection in place, with several companies known to have gone through the top of their reinsurance programmes and called on parent organisations for additional support.
Whose responsibility is it to ensure these companies remain viable operations once a storm hits? The local regulator obviously has an important role to play, but so do the rating agencies and arguably more work needs to be done by them to ensure sufficient reinsurance protection is in place. Whether these issues are rectified remains unclear.
While for the most part the sun has been shining in Miami in recent days – providing plenty of opportunity for various golf outings - that shouldn’t deflect from the reality that negotiations for the upcoming Latin American renewals are likely to be tough going.
The coming months will see many Latin American cedants look to renew terms on their reinsurances, and the past two weeks in Miami have provided many with an opportunity for those discussions to progress.
From my discussions with various parties in recent days, there is, unsurprisingly, a desire from property catastrophe reinsurers to push for further rate rises in light of the losses faced in the region during 2017. Let’s not forget, it wasn’t just hurricanes that struck Latin America, but also two earthquakes in Mexico.
But as ever, there is a plentiful supply of capacity desirous to be put to work. Some capacity has apparently withdrawn, but there remains an oversupply, and as such, reinsurers’ ability to push through increases will be dampened. Even if they walk away, brokers remain optimistic there will be someone waiting to swoop in and pick it up.
The market has been through this posturing many times before in recent cycles, only to be disappointed when the rubber hits the road. Along with the Japanese renewals at 1 April, the Latin America renewals will be a valuable data point for seeing whether this time really is going to be different or not.