Aspen’s Dunleavy: Reinsurers have swallowed “dose of reality” around nat cat

The industry has been forced to take “a dose of reality” around natural catastrophe risk in the last few years, but while rates have changed, pricing adequacy remains a challenge, according to Aspen CUO Christian Dunleavy.

Speaking with The Insurer TV from its pop-up studio in the Hôtel de Paris during the Monte Carlo Rendez-Vous, Dunleavy said: “I think we all had to take a dose of reality around nat cat in the last few years. And from my perspective there’s always a lot of focus on rate change, but rate adequacy is really the key question.”

Market uncertainty and loss experience have warranted the additional premium paid at recent renewals for catastrophe exposures, he emphasised – particularly in Europe and for secondary perils.

“If you look back historically, a lot of the concentration and also rate has been around peak peril zones, which tends to mean US wind,” he said.

“The reality is that international cat has seen significant price reductions over the last decade. If you look at Europe, they’ve probably given back about 50 percent of the rate,” Dunleavy continued.

“To get back to where you started, before a lot of these climate, social inflation considerations in Europe, for example, you’re looking at potentially doubling pricing,” he said.

“Will that all happen in one year? No. But I do think the international cat zones are really in need of a rethink and repricing and we’re going to be pushing hard there. And if we don’t think we’re getting paid appropriately, we will be turning down that account,” he added.

Looking for growth in casualty and special risks

Under group CEO and chairman Mark Cloutier, Aspen has undergone a transformation over the last three years to streamline its business, leading to a recent upturn in its results. The (re)insurer recently announced it had doubled its operating income to $130mn in the first half of 2022.

Historically, Aspen Re has been a high performer within Aspen Group, Dunleavy suggested, but – like the rest of the industry – “the last few years has been difficult”. In response, he has supervised a “simplification” of its reinsurance book, products and distribution.

“Like everyone, we did some hard thinking about how we could really be the most responsive and what the best setup was for Aspen as a group,” he said.

“We really tried to pull things in, run a really tight, controlled, highly opportunistic reinsurance platform going forward. That drove a lot of the decision-making,” he said.

“Hopefully, it sets us up to give good solutions for clients through the renewal process, and gives us flexibility across the group to move in and out of products as we think it makes sense. And also to generate the kind of return that we think is warranted for the amount of risks that we’re taking.”

“Some of the casualty classes are interesting,” Dunleavy said. “Within the specialty account, we’ve tried to hone in on the classes that we think make sense for us, around marine and some of the kind of what we call special risks, versus some of the other products that can look profitable briefly, and then give a lot of that profit back.”

The Insurer recently revealed the reinsurance arm of Aspen is to cease writing all aviation, space and bloodstock risks, as part of its remediation.

For property cat risks, the demand for profitability has replaced a desire to grow, explained Dunleavy.

“On the property cat side, we’re really focused less around gross or net growth of our property cat exposures, but much more around really trying to drive what we think is appropriate pricing into that globally,” he said.

“I think there are different answers in different regions around the world around property cat.

“We’re going through that planning process now, we think we’ve built a good portfolio, the market is helping us, and some of the moves we’ve made over the last few years should really support that,” he concluded.

Listen to the full interview with Christian Dunleavy, speaking to The Insurer TV from the suite in the Hôtel de Paris that has become a pop-up studio during the Rendez-Vous. You will hear about: