Capital has calmed down, meaning more certainty for renewals: Inigo’s Merrett

Because some of the capital in the reinsurance industry that had been nervous about potential losses from last year’s hurricane Ian has now calmed down somewhat, Russell Merrett, Chief Underwriting Officer of Inigo, the Lloyd’s syndicate owner and specialty underwriter, believes there will be more certainty on capital availability at this year’s renewals.

Merrett, who was one of the Inigo founders, was speaking during a panel discussion moderated by Andy Marcell, Aon’s CEO of Risk Capital, last week.

Comparing and contrasting the state of the market and sentiment among parties on either side of the reinsurance market, with a view to how the end of year renewals might pan out, Merrett explained that conditions seem more stable and that the January 2024 renewal outcome could be more favourable as a result.

Reflecting on the prior year, Merrett said, “If I cast my mind back nine months, or 12 months, I think capital was really pretty stressed because hurricane Ian was either just about to happen, or had just happened.

“There was tremendous uncertainty about what impact that would have on people’s balance sheets, and in particular, what it might do to the insurance-linked securities world and what might be trapped collateral and therefore the sort of lack of capacity that might have been available for 2023.”

Merrett went on to highlight that now, as the magnitude of the industry loss from hurricane Ian has become clearer, a more stable market has emerged.

“It feels like that’s all had a chance to work through the system and one could reasonably observe that hurricane Ian, which will still cost somewhere in the $40 to $50 billion range, has been a much more manageable catastrophe than perhaps we feared at moments as an industry,” he said.

Adding that, “Some of the capital that was really nervous has calmed down.

“I feel like as we go into 2024 there’s just much more certainty about the available capacity in the insurance and reinsurance cat world.”

He continued to say, “Certainly, that was the vibe I took from Monte Carlo last week, that many of the people that we speak to, who we sell to and buy from, were feeling pretty calm about what was about to happen and confident of our ability, or their ability, to offer capacity.

“That just wasn’t there, if you roll back to last November.”