Rendezvous de Septembre – Retrospective

1. Market remains on edge as storms bubble up in Atlantic
2. Loss reporting delays could influence reinsurance renewals
3. Alternative capital/ILS may find opportunities post Hurricane season

As expected, talk at Rendezvous de Septembre was dominated by Hurricane Irma. Thankfully the lack of a major catastrophe became the story, rather than previous predictions of a loss up to $100bn.

However, discussion quickly turned to the issues and problems yet to come. Everyone is aware the hurricane season has a couple more months to go and another major event could yet move the market into “shock territory”.

Delay at renewal?

As a result, this potential scenario was in fact being spoken of as a potential cause for delaying quotes at forthcoming renewals. The next few months will see the market trying to ascertain the true extent of Irma/Harvey losses with slow reporting a constant theme, overall numbers could be a challenge.

People of course have to return to their homes, there has to be examination and determination of all losses policyholders may suffer, whether properties have suffered structural losses and the determination of what could be significant ongoing BI loss from problems like the wide-spread power outages throughout Florida as Irma hit and moved on.

It became increasingly common at the Rendezvous with adjustors already engaged and focusing on Harvey, to hear someone ask if there would be enough feet on the ground to get those Irma losses looked at.

Certainly, there is a belief that the rating impact could be confined geographically to the U.S. property market, but with the retro market also likely to see a hit. There was much talk of Lloyds seeing significant exposures through its binder and facultative books and that Irma will hit the direct and facultative market significantly.

Opportunity for ILS?

Irma was also recognised as a significant moment for alternative capital such as ILS funds. Those hit by the storm were saying their next immediate decision is to understand whether their capital will be capable of release and, subject to whether losses hit, do they have an appetite to stay in the market?

In addition, if such capital exits, how much will that be on a net outflow basis? For those waiting in the wings, this could be a good opportunity to join in but only as long as new capital is ring-fenced from the storm losses to date.

The very loud and clear message from Rendezvous de Septembre 2017 was one of confidence in being able to handle and respond to the losses. No immediate loss issues were identified save for the ‘usual suspects’; adjustment, quantum and possibly “wind versus storm” disputes.

While we always adhere to cautious “expect the unexpected” as the market awaits actual losses to come through so it can move away from arguments about catastrophe models, one thing is certain: Irma did not cause a seismic shift to make this year’s RVS the beginning of a hard market cycle.