Interview: Andy Caldwell, Barbican Syndicate 1955


25.10.11 TUESDAY


The only way is up for casualty rates


Intelligent Insurer speaks to Andy Caldwell, non-marine reinsurance divisional manager at Barbican Syndicate 1955, about the state of play in the European casualty market.


Q What are the major factors driving in Europe?


the casualty reinsurance markets A The casualty reinsurance market in Eu-


profitable results since 2002/3. Original rates and reinsurance rates peaked in 2004 and have seen a steady decline since then. At the high point of the market cycle, insurers and reinsur- ers generated substantial underwriting profits while reserving prudently. Reserve releases in the declining market have funded the smaller margins of recent years but there is nothing left in the tank and the market is operating in very challenging conditions. Insurers and reinsurers are having to man-


age stagnant economic conditions, leading to at best limited growth, alongside a competitive market. Inflationary pressures and very poor investment returns are causing additional dif- ficulties together with increased cost of capital, growing expense ratios and rising loss ratios. Motor reinsurers are having to deal with the uncertainty resulting from legal change which affects the size and pattern of claim settlements and makes relying on past experience for pric- ing purposes much more difficult. The one bright spot is a reduction in bodily


injury claims frequency in the workplace in many European countries. This appears to be a result of improved health and safety regimes and has allowed some degree of legitimate dis-


inconsistency in how insurers reserve them.


rope has generally enjoyed a period of Q What are your expectations for


pricing on casualty lines in 2012?


A Original rates appear to have reached the


bottom of the cycle so the only way should be up. There have already been pockets of rate increases in distressed ar- eas such as UK primary so- licitors’ PI, financial advisers and


valuers but otherwise


rates are showing little more than inflationary increases. Reinsurance rates have been relatively stable in recent years and this is expected to continue through 2012. The main pressures on pricing will naturally come from the surplus of capacity in most sectors of the reinsur- ance market, of which casual- ty is no exception. The so-called standard lines of motor and general liability are expected as usual to be the most competitive, although the difficulty in calculating a technical rate for mo- tor excess of loss may lead to a two-tier market


The main pressures on pricing will naturally come from the surplus of capacity in most sectors of the reinsurance market, of which casualty is no exception.


count in insurers’ technical rates. To counter this, however, is a steady increase in severity which is impacting reinsurers. On the financial lines classes the economic


conditions are generating notifications in the professional indemnity (PI) and directors’ and officers’ liability (D&O) sectors. Many of these circumstances are complex and liability is dif- ficult to determine and as a result there is some


comprising reinsurers who take a more san- guine view of future claims costs against others who are much more pessimistic. Generally, the specialty lines of PI, D&O,


medical malpractice and financial institutions have less reinsurance capacity as a result of the difficulty in modelling the exposures and the potential for systemic losses. Reinsurance rates may well rise in this area in response to large


6 | INTELLIGENT INSURER —BADEN-BADEN TODAY | Tuesday October 25 2011


Andy Caldwell, non-marine reinsurance divisional manager at Barbican Syndicate 1955


loss reserves and the ongoing volatility in finan- cial markets.


Q What opportunities do you see in A Casualty reinsurers underwrite the cost


liability lines? of legal change and future inflation, as


well as the effect of economic conditions. As all of these factors are subject to change there tends to be generic growth in demand for casu- alty insurance and reinsurance products over time. The degree of growth is partly dependent on the size of each market and its maturity. Demand is increasing for specialty casualty insurance products in the SME sector in most of Europe, Asia and South America. Most in- surers have found that if they can overcome the hurdle of high acquisition costs the original business is profitable. Reinsurers are respond- ing to this by providing facultative, proportional or non-proportional cover.


www.intelligentinsurer.com


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20