Investors poised to enjoy rewards from industry-wide reinsurance reset: Ching, ReFlex

Investors in the reinsurance sector, including those allocating to insurance-linked securities (ILS), are set to enjoy the rewards of the recent industry-wide reset, with higher returns available and good news to come from ILS managers, Neville Ching of ReFlex Solutions has said.

Commenting on the state of the reinsurance market after the key 1/1 2024 renewals, Neville Ching, Chief Executive Officer of independent Bermuda reinsurance broker ReFlex Solutions explained that this reset has presented opportunities for those with capital in 2024.

“What a difference a year makes,” Ching explained. “The ‘Great Market Reset’ of 2023 changed the reinsurance landscape for the better. A focus on underwriting profitability and tighter terms and conditions created a much-needed change in the market that has led to a healthier and a more sustainable trading environment.”

“As a consequence of the hard market conditions, the 2023 full year results from the reinsurance sector are expected to be record-breaking – with many combined ratios sitting not just under 100, but down well into the 80s,” he continued.

Ching believes that the first three-quarters of 2024 are set to be “just as profitable” as 2023, which will set the tone for the January 2025 reinsurance renewal season.

Ching believes the ILS market is well-positioned, with catastrophe bonds expected to have another strong year, while “For the first time in years, investors will receive good news and handsome profits from their ILS managers.”

Thanks to the industry-wide reset, “Existing and new investors in the reinsurance sector are poised to enjoy the rewards,” Ching said.

With reinsurance a more profitable opportunity for investors, Ching is expecting growing interest.

“Investors are providing more capacity as confidence returns to the reinsurance market. Investors returning or entering reinsurance for the first time will find a stronger market following the 2023 industry reset, and a highly-disciplined environment that will now present the opportunity for incumbents, returnees and providers of fresh capital to achieve long term value,” he said.

Ching also expects that Lloyd’s will prove a venue that is increasingly attractive to investors, citing the recent completion of a property catastrophe bond sponsored by Beazley and transacted via Lloyd’s London Bridge 2 PCC structure, as an example that “proves that Lloyd’s is a great place for institutional investors to gain access to global insurance and reinsurance risk.”

Ching expects continued sector innovation to help drive capital into reinsurance as well.

“The ‘Great Reset’ of 2023 provides the platform for innovation via new technology, enhanced portfolio management tools, lower distribution costs, and increased fuel in the system via investment that will lead to a more robust and less fragile market environment. Brokers can continue to develop creative solutions where investors will have the chance to deploy capital into specific programmes or market sectors where there are measured opportunities,” he explained.

Adding that, “The 2024 outlook is positive for the reinsurance sector, particularly for investors who been calling for a more secure and profitable environment. The industry-wide reset has created a more sustainable market with long-term relevance and new opportunities.”