Retro capital in demand, pricing to stay attractive: Reardon, CEO, Hiscox Re & ILS

The retrocessional reinsurance market is one area where capital is in more demand, which means pricing may stay attractive there and Hiscox Re & ILS expects to be able to continue supporting that market at the renewals, CEO Kathleen Reardon said yesterday.

Reardon, the Chief Executive Officer of Hiscox Re & ILS, the international reinsurance and insurance-linked securities (ILS) arm of the Hiscox Group, was speaking during a panel discussion moderated by Andy Marcell, Aon’s CEO of Risk Capital, yesterday.

She discussed the ILS market and the current state of investor sentiment in the space, saying it is no longer the only game in town, for investors.

“A lot of the ILS markets, first and foremost, have other opportunities right? We’re not the only game in town. The risk free rate, the interest rate environment is pretty compelling elsewhere. So I think that will do a lot to maintain the current rate environment that we have,” Reardon explained.

She went on to say that, “I think that’s one explanation of why the capital inflows haven’t been too abundant coming into Bermuda, which historically has been a natural place for that to happen.

“Also, some of the ILS investors that supported us over the past 5, 6, 7 years have participated in the heightened loss environment and they have their own rebalancing to do, because of bond and equity portfolios.

“Nine months doesn’t make a hard market, we can’t say success after nine months. So I think a lot of those ILS investors are saying, let’s get through a year, let’s see the rates sustain into 2024.”

Reardon went on to say that the ILS investors provide a key source of capital and that the reinsurance industry needs all sources available to it, especially for some of the peak perils.

“We have risks like cyber, that are predicted to outpace property cat by 2030. We need all pots of capital, so we don’t want to be in this situation forever. But in the meantime, I think we’re servicing the demand pretty well,” she told Aon’s Marcell.

Then, Reardon moved on to discuss the retrocession market, which is one place she sees an opportunity for Hiscox Re & ILS to maintain its key position as a retro writer.

“Hiscox has been offering retro capacity for the better part of 50 years and the tenure of our underwriters goes into the decades,” Reardon said.

“So, right now we’re we’re a top 10, if not top five retro provider and that was where the terms and conditions tightened, that was where it happened the most,” she continued. “We really did get down to much narrower coverage, really putting that capacity where it’s needed, out in the tail, where the reinsurers need our support.”

Closing to say, “We expect our support to continue, we’re experts in that area. But that is a capital that is in demand, so I expect those prices stay pretty attractive.”