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#ReinsuranceMonth 11 September 2023
Monday
MONTE CARLO RENDEZ-VOUS

(Re)insurance | Insight | Intelligence
• CYBER RE • TOP 10 REINSURANCE BROKERS • CAPITAL RAISES • CASUALTY ANALYSIS
Zeller and Arora fundraising for $1bn

Switzerland-based Alpine Re start-up
Sources said that Alpine Re is They added that there is understood
working with Howden Tiger to raise to be strong ongoing investor interest
$1bn of underwriting capital for a as the initiative progresses towards
targeted 1 April 2024 start, subject its fundraising target, with positive
to rating agency and regulatory feedback on the credibility of the
approval. team and business plan.
Zeller and Arora have a strong The start-up is understood to be
existing relationship from their time currently assembling a high-profile
together at Axis. Zeller sat on the executive team that is expected to be
F ormer Hannover Re CEO Wilhelm

Zeller and ex-Axis Re CEO Steve
Arora are in the process of fundraising
board of the Bermudian for 11 years
as a non-executive director before
retiring at the end of 2020, with Arora
led by Arora and Zeller.
Zeller, aged 79, would be expected
to take the chairman role, tapping
for a new Switzerland-based multi-line joining as CEO of reinsurance in 2018, a wide network of investor and
P&C reinsurer called Alpine Re, which is based in Zurich. industry contacts from his time at
looking to make a strategic entry early Banking sources said that there is Hannover Re and before that Cologne
next year to target what is viewed as a meaningful traction with the targeted Re – which was subsequently bought
significant opportunity in the space, The fundraise, which is considered on by General Re.
Insurer can reveal. track for the proposed launch date. The executive Continued on page 6
AerCap deal creates settlement framework that

shrinks $10bn+ disputed Russian lessor claims
a framework that could see the The $645mn commercial settlement
industry’s overall loss shrivel from – which was approved by US and
$10bn+ to $2bn-$2.5bn via commercial Russian authorities – is expected
settlements rather than litigation. to be a model and framework that
AerCap, the world's largest aircraft AerCap will try to replicate with other
lessor, last week agreed to settle an Russian airlines and operators and
insurance claim over 17 jets and five also for other lessors to adopt.
engines leased to flag carrier Aeroflot Crucially, it set a structure for
and its subsidiary Rossiya, part of a other settlements to follow which
A viation (re)insurers and executives

attending the Monte Carlo Rendez-
Vous have welcomed last week’s
wider dispute involving more than
400-owned Western planes stranded
or confiscated in the wake of the
– if agreed – would see the current
~$10bn of disputed claims (see
page 36) shrink to $2bn-$2.5bn and
landmark AerCap deal as heralding invasion of Ukraine. which could Continued on page 38
You care about

agility. The Feeling’s Mutual
So do we. Discover more at www.libertymutualre.com
Howden Tiger is a trading name of Howden Reinsurance
Brokers Limited, part of Howden Group Holdings. Howden
Tiger is authorised and regulated by the Financial Conduct
Authority in respect of general insurance business. Registered
in England and Wales under company registration number
7142031. Registered Office: One Creechurch Place, London
EC3A 5AF. Calls may be monitored and recorded for quality
assurance purposes. 08/23 Ref: 9350
News | 3
Ageas Re doubles property cat line size

to €20mn; enters casualty ri at 1.1
markets following its 1 January 2023 non-Asian markets, will also enter
entry into third-party property cat casualty reinsurance at 1.1, Racz said.
reinsurance. “We did push ahead on the property
“Out of 70 target accounts, we wrote side at 1.1 and our business plan has
68 and were signed in full on 64. The exceeded expectations but our goal
support we have received has been was always to be a twin-engine vehicle
overwhelming,” Racz said. – to write both property and casualty.
The unit – which underwrote Now the timing is right for us to bring
premiums at the upper end of its our capacity to that class,” Racz said.
A geas Re, the reinsurance arm of

Belgian insurance group Ageas, will
double its maximum line size in property
€35mn to €40mn guidance at 1.1 – will
now look to further increase its market
share through a “gradual expansion”
“Our ambition remains unchanged
from last year. We want to become a
full-service reinsurer in the long term
cat to €20mn at the upcoming 1 January by both line of business and geography. with a presence across all the main
renewals, with the ambitious group also In property cat, the business will lines.”
targeting a casualty reinsurance entry. take up to €80mn of risk per any one Led by former Peak Re casualty
Speaking to The Insurer on the uncorrelated event, with an average specialist Stephan Rappaz as
sidelines of the annual Rendez-Vous line of €5mn and maximum line of underwriting director, Ageas Re’s
in Monte Carlo, Joachim Racz, group €20mn for 2024, up from €10mn this casualty offering will predominantly
director of Ageas Re, said the unit had year. serve local and regional European
been “overwhelmed” by the support of Ageas Re, which focuses on mainly clients with a personal lines profile.
Fronting market surges to $13bn as

“asset-light” structures proliferate
F ronting companies wrote more than of insurance research at Conning,
$13bn GWP last year – up from $9.5bn commented: “Asset-light entities are
in 2021 and more than double the level delivering for brokers and insureds,
analytics are increasingly pivotal, these
agile entities can often move faster
than traditional carriers, identifying
of 2020 – highlighting the increasingly developing new products for some and developing attractive niche
important role that they, MGAs and markets and offering speedier
reciprocal exchanges occupy in the Fronted market premium development submission turnarounds”.
industry ecosystem. ($mn) David Flandro, head of industry
According to new research 14,000 analysis and strategic advisory
$13,123
released by reinsurance broker at Howden Tiger, added: “The
12,000
Howden Tiger and investment numbers are revealing … It is
management firm Conning, 10,000 $9,498 evident that asset-light structures
these “asset-light” platforms are 8,000 are forging a new frontier,
“forging a new frontier” within $5,849 creating new approaches for
6,000 $5,406
the global (re)insurance market. the industry.” The trend was
4,000 $3,686
The report – Travelling Light also acknowledged by Elliot
– also estimates premiums 2,000 Richardon, vice chair of Howden
underwritten by non-insurer Tiger, who pointed out last week
0
affiliated US MGAs have more 2018 2019 2020 2021 2022 that fronted premium sourced
than doubled since 2018, rising Prepared by Conning, Inc.
Source: Copyright 2023 S&P Global Market Intelligence, LLC
through MGAs surpassed Lloyd’s
to $33bn in 2022. Overall, premium sourced through
US MGAs underwrote in excess of of the most challenging exposures coverholders in 2021 for the first time.
$85bn in premium in 2022, Conning in today’s market, including cyber Richardson – who was speaking at
calculates, which suggests the global risks and property perils impacted by The Insurer’s Pre-Monte Carlo Forum
MGA market is now significantly in climate change.” in London – predicted the trend will
excess of $100bn. William Pitt, director He added: “At a time when data continue.
theinsurer.com | #ReinsuranceMonth Monte Carlo Rendez-Vous 2023 | Day 2

4 | Contents
Inside this edition

30 Jill Beggs
EDITORIAL Everest’s head of North America
Peter Hastie Managing director
Email: [email protected]
reinsurance on increased insured losses
David Bull North American editor in the region
Scott Vincent Managing news editor 36 Aviation Lessor Claims
Email: [email protected] The impact of the AerCap settlement on
Michael Loney North American associate editor
the collective value of legal cases against
Christopher Munro North American associate editor insurers
James Thaler Head of Americas news content 42 Camilo Rodriguez
Ryan Hewlett Deputy news editor
18-20 Cyber Analysis Axis Capital’s head of international credit
Email: [email protected] We examine signs of increased reinsurer and surety on the latest trends in the
Sophie Roberts Head of The Insurer TV appetite for cyber ahead of 1.1 sector
Janet Babin North American content editor, The
48 Nick Nudo
Insurer TV Scor executive suggests reinsurers aren’t
George Abbott Producer, The Insurer TV
being compensated for higher US liability
Email: [email protected] risk
Rebecca Delaney Reporter
60 Chain Reaction
Carlos Pallordet Head of product and data How is the industry managing PFAS
Michael Jones Reporter
liability exposure in the face of rising
Email: [email protected] litigation?
ADVERTISING, MARKETING AND SPONSORSHIP 74 In Memoriam: Michael Butt
Spencer Halladey Commercial director We pay tribute to another industry great
lost over the last 12 months…
Andy Stone Sales manager
Email: [email protected] 24-28 Top 10 Brokers
Abby Baker Subscriptions manager
The Insurer’s annual top 10 reinsurance Viewpoints
Beatrice Boico Head of marketing and events broker rankings returns for 2023… 16 Guy Carpenter’s Anthony Cordonnier and
Teresa Reister Senior marketing executive
Erica Davis on systemic cyber cat events
Email: [email protected] 22 Simon Kilgour of CMS warns against
Isabelle Brooker Senior marketing and events
coordinator knee-jerk wordings in response to black
Email: [email protected] swan events
PRODUCTION 40 Acrisure Re’s Ghassan Mansour looks at
Paul Sargent Creative director
the rise of facultative reinsurance
Ewan Harwood Production editor 44 Howden Tiger’s George Harris Hughes
Harry Whitworth Sub-editor and Michelle To
Email: [email protected] 50 Rich Henderson of TransRe examines
the impacts of rising verdicts on casualty
OPERATIONS
Kevin Freeman Head of solutions 32-34 Andy Marcell lines
Email: [email protected] Aon’s CEO of Risk Capital expects a more
Tim Riddell Finance director 52 EY trio consider the consequences of
orderly 1.1 this time round
generative AI on the (re)insurance sector
Info email: [email protected] 54 Moe Khosravy from Moody’s RMS
Published by World Business Media Ltd
© World Business Media Limited 2023 outlines the role of generative AI in risk
All rights reserved. No part of this publication insights
maybe reproduced, stored in a retrieval system, or
transmitted in any form or by any means, electrical, 62 LM Re CUO Chantal Rodriguez underlines
mechanical, photocopying, recording
or otherwise without the prior written permission
importance of maintaining discipline
of the publishers. The views expressed in The 64 Andrew Johnston of Gallagher Re
Insurer magazine are not necessarily shared by the
publisher, World Business Media Limited. explores the shift in global insurtech
The views expressed are those of the individual funding
contributors. No liability is accepted by World
Business Media Limited for any loss to any person, 66 Supercede’s Jerad Leigh emphasises the
legal or physical as a result of any
statement figure or fact contained in this title. The
56-58 Covid-19 BI cost of poor reinsurance data
publication of advertisements does not reflect any We examine the continued uncertainty 68 ICEYE’s Penelope Kourkouli and Stephen
endorsement by the publisher.
around Covid-19 BI claims Lathrope on wildfire loss assessment
Day 2 | Monte Carlo Rendez-Vous 2023 #ReinsuranceMonth | theinsurer.com

Comment | 5
Vesttoo: A fraud waiting to happen...

T he Monte Carlo Rendez-Vous is the first major
international (re)insurance event to take place since
the Vesttoo scandal first emerged in June. No surprise,
Another suggests that in the case of Vesttoo, basic
tenets of reinsurance security were forgotten in
the face of the prospect of innovative structures
then, that it was a major discussion point yesterday as for transferring risk in areas where other forms
the 2023 Rendez-Vous opened. of capacity were not readily available, at least at a
Of course, the immediate priority for impacted competitive price. The attractions of new brokerage
parties has been replacing capacity and collateral in and fee income may have added to the collective
the market and, for some, the recovery of funds in the myopia.
courts. A third view posits that while the fraud itself has
But as the post mortem continues, arguably the grabbed the headlines due to its outrageousness, it
biggest question is around the failure in checks and is the complicated “value chain” around MGA and
balances that allowed this seemingly programs business that is a contributor.
preventable reinsurance fraud to take Speaking to The Insurer TV, TransRe
place. CEO Ken Brandt questioned the efficacy
In other words, how did so many [This is] an example of of a business structure when there are
professional organisations fail to notice where the basic tenets of six to eight different parties involved in
that LOCs purported to have been issued the distribution chain.
by NAIC-approved banks on Vesttoo-
reinsurance security were “It starts with a broker, goes to an
facilitated deals were not real? forgotten MGA, goes to another broker, goes to
How did Aon allow so much business a fronting company, goes to another
to be transferred through its White Rock broker, goes to a transformer, goes to an
facility when – as now appears to be the ILS manager, and goes to some type of
case – it was a fraudulent enterprise from the outset? investor. That’s a pretty complicated value chain there.
Shouldn’t Clear Blue – which recognised a $16mn Q2 “And what that tells me is you have a lot of people in
hit on 1 September (see page 8) and is scrambling to that value chain, who don’t have aligned interests with
replace reinsurance capacity and maintain its critical underwriting and don’t have aligned interests with
A- rating – have done more? checking things, like LOCs. So it was trouble waiting to
The fact that this oversight appears to have gone happen,” he commented.
undetected for so long is still met with incredulity in Brandt also highlighted a point made by Program
some quarters Manager last month – that there is usually a reason for
And how did a company emerge from nowhere to cedants to take this route – the availability and price of
write more than $4bn of business with such opaque traditional rated cover. “I think it’s distressed business
structures? or I think it’s business that can’t find the coverage at
A partial context is provided by the rapid growth the price they want from well-capitalised traditional
and perceived opportunity that has existed in the MGA insurance companies and reinsurers,” said Brandt,
and programs space – and the related fronting sector – suggesting that the Vesttoo affair is also a symptom of
in the last few years. the brittle end of the program sector.
As our sister publication Program Manager recently That business is not going away, however. And as
reported, David Paul, principal and lead analyst at another senior reinsurance source put it, this means
Alirt Insurance Research, summed it up succinctly, you will always find “bottom-feeders” in the market.
suggesting that the flood of money into the sector and MS Reinsurance CUO Charles Goldie – commenting
rush of specialty insurer and distribution start-ups at The Insurer’s Pre-Monte Carlo Forum last week –
was a contributing factor to the fiasco. spoke for many when he described the affair as an
“Whenever a surplus of eager money meets new “industry embarrassment”. The job of the industry is
ideas and opportunities, excesses are bound to follow. David Bull, to ensure it never happens again and if that means
North
These excesses breed carelessness and, inevitably, American questioning established structures and approaches to
shortcuts are taken and cracks begin to show,” he said. editor reinsurance security, then so be it…

6 | News
Fears of regulatory overreach on

LOCs as Vesttoo scandal deepens
While perennial industry themes security by rating agencies and
such as market conditions, 1.1 renewals, regulators, in light of recent issues and
the use of technology and geopolitical/ fraud allegations surrounding letters
economic concerns will dominate many of credit posted to collateralise certain
of the discussions, the implications of reinsurance obligations by a major tech-
the Vesttoo fallout were not far away enabled platform.”
from the thoughts of executives at the Sources have expressed fears that
beginning of the Rendez-Vous – not least action could even take the form of
following last week’s extraordinary applying capital charges to the use
revelations. of LOCs, which would challenge the
A s global (re)insurance leaders gather

in person for the first time since the
Vesttoo scandal emerged in July, fears are
In the run-up to the event, Howden
Tiger vice chairman Elliot Richardson
became one of the first prominent
viability of using them on transactions
where so-called alien reinsurers are
required to post collateral to reinsure
growing that heightened scrutiny around market figures to publicly warn of US insurers.
letters of credit (LOCs) may see rating the threat, telling The Insurer’s Pre- Amid the fallout from the Vesttoo
agencies and regulators take actions that Monte Carlo Forum: “There will likely affair, it was inevitable that the use of
disrupt a long-established practice. be increasing scrutiny of reinsurance LOCs would Continued on page 14
Continued from page 1
Zeller and Arora fundraising for $1bn

Switzerland-based Alpine Re start-up
was CEO of Hannover Re and E+S company formation and to create The Switzerland location for the
Ruck from 1996 to 2009 and was value that will be sustainable across start-up will provide access to global
instrumental in reshaping the market cycles. business, as well as a rich talent
company as it evolved into a major The business model and strategy pool under the watch of a well-
global reinsurer, including growing has been described by sources as respected regulator in an innovative
premium threefold and delivering an a strategic market entry guided by environment that provides tax
average return on equity of 13 percent. disciplined underwriting and low cost efficiency, sources said.
Arora, who is lined up as CEO, led the ratios with a lean operation from a Although the start-up’s leadership
transformation of Axis Re from 2018- single location, rather than building a team wouldn’t comment on the details
2022 and was previously an executive global footprint. of the business plan, Zeller said: “From
at Swiss Re from 2006-2017, joining Market sources added that the day one, I was fully aligned with
with its acquisition of GE Insurance focus will be on thoughtful product Steve to create a reinsurer focused on
Solutions. diversification in mature markets with strong fundamentals – maximising
In addition to Howden Tiger, Alpine an emphasis on cycle management. underwriting profit and practising
Re is understood to be working with a They added that Alpine Re will be exceptional cycle management in a
big four consultancy firm and a a “traditional” reinsurer lean corporate setting from a
tier one global law firm. focused on maximising single location.
Alpine Re is targeting a underwriting income, “I have done this before in
market opportunity that as opposed to an asset my career, and the timing is
includes generational attractive management play, or perfect now for the reinsurance
underlying insurance conditions, hedge fund reinsurer market and Alpine Re.”
dislocation in reinsurance supply Wilhelm Zeller model. Steve Arora Alpine Re is expected to
and demand along with high The targeted low cost ratio continue engaging with rating
interest rates. will be based on a lean, tech-enabled agencies and the Swiss regulator as it
These conditions – the start-up is and outsourced model to control and advances company formation and the
likely to argue – are ideal for new reduce operating expenses. financing process.

You care about
agility.
So do we. Henrik
Zoell
Underwriter –
Reinsurance
Netherlands (Treaty
Reinsurance P&C)
Abdessamad
EL ANGOUDI Ines
Underwriter – Cloarec
Agriculture & Senior Underwriter –
Parametrics Property & Casualty
Discover more at www.libertymutualre.com

The Feeling’s Mutual
8 | News
Clear Blue replaces Vesttoo reinsurance for all

in-force business and takes $16mn Q2 charge
by fake letters of credit (LOCs) posted recoverables understood to have filed
as collateral. as if the collateral was legitimate.
Clear Blue reported that it recognised The statement added: “Clear
a $49mn reduction in group capital and Blue continues to operate without
surplus between the end of the first impairment and work towards
and second quarters of 2023. finalising its permanent resolution of
But $33mn of the reduction is the Vesttoo-caused challenges.
temporary and relates to statutory “Management has been working
surplus strain from prepaid diligently to identify and implement
H ybrid fronting carrier Clear Blue has

filed delayed Q2 statutory financial
statements which include a $15.8mn
commissions on unearned premium
that will reduce to zero as premium
earns through.
solutions to the challenges caused by
the Vesttoo collapse and is working
closely with AM Best to ensure Clear
charge for the writedown of collateral on The $15.8mn charge specifically Blue’s A- rating is upheld. We look
run-off business in relation to Vesttoo relates to a provision made for the forward to continuing to engage with
and Corinthian Group, as it also said that current best estimate of deficiency stakeholders, strengthen our business,
it has replaced all reinsurance on its of collateral on the run-off business and move forward as a market leader
ongoing portfolio of business. associated with Vesttoo reinsurers and in insurance programs.”
Although the fronting carrier did not Corinthian Group. In notes to the 30 June statutory
reference the providers of replacement In its statutory filing, Clear Blue statement filing by Clear Blue Specialty
reinsurance capacity in its commentary confirmed it will retain the run-off Insurance Company, the firm said
in the quarterly statement, its Schedule business reinsured by Aon’s segregated that it had been informed that certain
F filing shows that new reinsurers at cell platform White Rock and LOCs issued by the Corinthian Group –
the end of Q2 included Roosevelt Road Corinthian Group and will cover the including Corinthian Re and Osprey Re
Re, MCK Re, XL Re Europe, start-up risk associated with the business with – had been provided by Corinthian to
Northern Re and Canopius Re. cash withheld in the company and in Vesttoo and presumed to be invalid or
News that the Jerome Breslin-led premium trusts. “obtained fraudulently”.
company has replaced all reinsurance In a statement to this publication, It added that Clear Blue has been
on its live book is likely to be welcomed Clear Blue said its financial statements successful in securing reinsurance on
by counterparties, as the carrier also take into account information learned current year’s treaties through third-
looks to address concerns that led to in the third quarter about Vesttoo, as party reinsurers and an affiliated
a review with negative implications requested by the Texas Department of reinsurer.
status being applied to its A- AM Best Insurance. Clear Blue said it is in the process
rating. Statutory accounting principles of obtaining collateral to support the
As previously reported, Clear Blue actually don’t require quarterly risk associated with its portfolio of
was the fronting carrier on a number filings to adjust surplus for changes programs that had Vesttoo capacity,
of transactions that involved Vesttoo- in circumstances after the period end, stating that it expects to have the
facilitated reinsurance capacity that with a number of other carriers that collateral in place by the end of the
has since been found to be supported have Vesttoo LOCs in their reinsurance third quarter.
Former Canopius UK CEO Willmont to join Lockton Re

S arah Willmont, the former UK CEO
of Lloyd’s insurer Canopius, is set
to join expansive reinsurance broker
for Willmont, who served as a senior
broker at Aon Benfield in its composite
global re specialty team, where
underwriter, deputy CUO and latterly
UK CEO.
While at Aon Benfield,
Lockton Re, The Insurer can reveal. she was responsible for the Willmont would have crossed
Willmont, who stepped down from production and servicing of paths with several of her new
the CEO role in October last year, will global non-marine retrocession colleagues, including Bermuda
work within Lockton Re’s retrocession business. CEO Jonathan Davies and
and property specialty division, as She then joined Canopius Bob Bisset, chairman, global
well as supporting London market and in 2017 and went on to hold a Sarah Willmont retrocession and property
global production activity. succession of senior roles at specialty, Bermuda and market
The move marks a return to broking the carrier, including joint active capital.

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10 | News
Richardson: The modern

broker must take the
Moneyball approach
E xisting structures that have been in place for 20-

30 years will be dramatically disrupted and a new
approach taken around data and analytics as insurers
The war for talent
There are few better-qualified London reinsurance
market figures to comment on the war for talent
and reinsurers pivot or change their capital stacks and considering Richardson’s involvement in a number
mix of distribution. of controversial team moves, including a fac team
This is according to Elliot Richardson, vice defection from Benfield to Aon that sparked a profit
chairman of Howden Tiger, speaking at The warning from the UK firm in 2006 and a current
Insurer’s Pre-Monte Carlo Forum. dispute with Guy Carpenter that sees him and
The modern (re)insurer needs to “adapt at never- Howden Group founder David Howden as named
before-seen speed” and the winners will defendants over a 38-strong European
be those that can “efficiently match risk walk-out earlier this year.
to the most appropriate form of capital”. But Richardson said: “Just hiring
But the executive directed his
The modern broker must stop account handlers or producers to grow
greatest call to action at his fellow peddling the same things that revenues is not a strategy.
intermediaries, stating “the middle have been done for the last “They must be able to bring value to
person in a transaction must bring the overall culture and business and do
value”.
decade things they never did before.”
He continued: “The modern broker He suggests flexibility by employers,
must stop peddling the same things that and adapting roles to sets of skills to
have been done for the last decade. You build organisations for the future.
need to bring smart partners in from outside the “Having a single P&L/aligned incentive model is
industry to help. You do not need to build everything crucial to allowing clients access to a full suite of
in-house.” capabilities in a harmonised way.
Howden Tiger is betting that its suite of “It is imperative to identify people to come and
services – which include capital market join the business to ‘score runs’ in a way they
expansion and strategic data-led advisory – never did at their previous jobs,” he continued,
will allow it to remain relevant to clients in the although he acknowledged “it won’t be easy for
future. the wider broker world to make this change”.
“In the new world of analytics and data, it’s The executive believes lines between
time to rip up the old and take the ‘Moneyball’ traditional insurance and the new world order
approach.” are becoming increasingly blurred, noting that
Moneyball is the celebrated Michael Lewis nimble MGAs, utilising fronting carriers and
book that charts the improbable success of the alternative reinsurance capital, are stealing
Oakland Athletics baseball team following a a march on the less-flexible incumbents.
data and analytics approach to player selection Although he added that incumbents are starting
under the canny stewardship of manager Billy to look to add these elements to their own
Beane. It was later turned into an acclaimed Michael businesses and adapt their models, and expects this
Lewis’ 2003
Hollywood film starring Brad Pitt. best-seller to gather pace.
Winners, in the reinsurance world, will be those Moneyball However, in a nod to the traditionalists in the
who look at the trends and data and structure their examines the market, he notes that “the ability to underwrite and
data-driven
business and offerings accordingly, Richardson approach place challenging business remains key”.
explained. of Oaklands Richardson, whose broking career started in
“This will mean a changing market structure, with Athletics’ the 1980s, has no time for standing still though,
general
roles like chief transformation and chief data officer manager Billy predicting: “The next five years may bring more
being at the top table.” Beane change to the industry than the past 25.”

12 | News
Swiss Re’s da Victoria Lobo: SRCC risks

increasingly front of mind for reinsurers
“When I think about Chile in 2019, he said. “So, that’s around aggregation
that was a property loss of $3bn- and attachment points. And it’s also
$4bn from strikes, riots and civil around making sure that we properly
commotion; and South Africa, a few price for this, because again, the point
years ago, where it was about a $2bn- is, we need to be able to respond when
$3bn insurance loss. France this year our insurance clients have coverage
– a €650mn loss – and there’s also the issues and face these coverage losses.”
losses from the [Black Lives Matter] However, with rates nudging up
protests in the US,” da Victoria Lobo across several critical classes of
R einsurers are increasingly concerned

about losses from strikes, riots and
civil commotion (SRCC) after a surge in
highlighted.
“We’re obviously looking at a
situation where concern in society
business, comprehensive cover is
becoming harder to obtain from an
affordability standpoint.
political unrest this year, according to around democratic political institutions “Look, the affordability topic is
Swiss Re’s head of P&C reinsurance for is manifesting itself in society’s unease always a hard one,” said da Victoria
western and southern Europe, Nikhil da and in our insurance sector,” he added. Lobo.
Victoria Lobo. Property treaty coverage for SRCC “I think the critical function of
Ahead of the Rendez-Vous de losses has tightened up notably in reinsurers is to independently look
Septembre in Monte Carlo, The Insurer the past year, but remains available. at what are the risks emerging,
TV sat down with da Victoria Lobo at However, multiple restrictions that properly price for those risks, then
Swiss Re’s headquarters in Zurich to should limit loss transfer have been as we plan over the coming months,
discuss the key talking points for the implemented; for example, changes to have a dialogue with our clients
conference. hours clauses and, of course, rates. around the coverage, the exposure
SRCC has made headlines across the “I think what the industry must do and the relative price to it. We need to
world, including the recent riots in is focus on what are the areas we can make sure that we keep this industry
France. provide our intellectual thought to it,” sustainable and responsive,” he said.
GC’s David Priebe: This is most attractive

market for investors in 40 years
outlined how increasing inflows – confidence returning in Q1 of 2024.
including in equity, where $4bn has “We are starting to see now people
come back to existing reinsurers; get seriously interested in investing,”
ILS, which has had inflows of $3bn; he explained. “You are going to see
and the private space, where capital continued inflows into the ILS space,
inflows are building – have made the particularly in the 144A market,
market more enticing for investors. which has really performed quite
He claimed that this is the most well.
attractive opportunity in the market And you are going to start seeing
Investors are seeing the most

attractive opportunities in the market
for the past 40 years, according to Guy
he has seen over the span of his 41-
year career.
Priebe explained that investors
some greater participation on either
existing carriers or some possible new
start-ups.”
Carpenter chairman David Priebe, which “went through four out of the last six Indeed, already this year, cat
he predicts will encourage greater years [seeing] negative returns, and bond issuance has surpassed all
participation from the investment [now] they’re looking for profit”. expectations, totalling close to $10bn
community in existing carriers, the He added: “The market has truly in the first six months of 2023.
144A market and possible new start- improved.” Priebe also expects increasing
ups. Priebe also shared his predictions interest in emerging risk areas such as
Speaking to The Insurer TV about for where new inflows of capital cyber will be a “massive” opportunity
the current state of the market, Priebe might occur, hoping to see investor for the sector.

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a component of the S&P 500 index. Additional information about Everest, our people, and our
products can be found on our website at www.everestglobal.com. All issuing companies may
not do business in all jurisdictions.
14 | Analysis: Vesttoo
Fears of regulatory overreach on LOCs as Vesttoo scandal deepens

come under the spotlight as counterparties sought
reassurances around collateral quality and security.
The Vesttoo accused insiders…
AM Best quickly came out with a note confirming
that it had opened a review into collateral
arrangements at the fronting insurance companies it
rates.
It said it was monitoring the situation and
reviewing fronting carriers and other insurers with Former CEO Former chief Former senior Former senior
material amounts of reinsurance counterparty credit Yaniv Bertele financial engineer director of capital director of Asian
risk and reliance on various forms of collateral, Alon Lifshitz markets Udi Ginati markets Josh Rurka
warning that rating actions would be taken “as
warranted”. transactions, typically in the form of an LOC, single
Clear Blue – ostensibly the fronting carrier most beneficiary trust, or cash.
exposed to Vesttoo after its $1bn strategic capacity It also applies to varying degrees to rated non-US
partnership announced last year – is among a reinsurers, depending on whether they have status as
number of carriers that have significant numbers a so-called certified reinsurer – where a percentage
of collateralised reinsurer relationships on their of cedant liabilities must still be collateralised – or a
Schedule F filings. reciprocal jurisdiction reinsurer (RJR), where they
AM Best put the company under review with have been approved by a state to be exempt from
negative implications, and Clear Blue has been collateral requirements, subject to meeting various
progressing actions to replace reinsurance and standards.
collateral on the programs it fronts for. This is where the concern of some reinsurers
In the kind of collateralised reinsurance lies – that in tightening up controls around fronting
transactions which MGAs and their fronting carriers carriers’ use of LOCs in a post-Vesttoo world, rating
are party to, a transformer such as Aon’s White Rock agencies and regulators may also impose restrictions
segregated cell platform might be used, with LOCs on their wider use, undermining the effectiveness or
issued to bridge the gap between premiums held and viability of this form of collateral.
Schedule F regulatory requirements for collateral. “I think what conceivably comes from ratings
But the use of LOCs as collateral in reinsurance agencies is a capital charge, an additional capital
transactions goes beyond some of the more parochial charge or different capital treatment from what they
practices in the programs, MGA and fronting space. receive right now. A more punitive capital treatment,”
LOCs are widely utilised as collateral in mainstream said a reinsurance executive.
reinsurance transactions in the US to allow alien “With regulators it’s probably the same. Maybe
reinsurers to reinsure US insurance companies. regulators start to challenge your internal capital
The requirement to post collateral applies to all model, to conceivably introduce loads around LOCs.
unauthorised reinsurers – including collateralised That’s where it would get meaningful for us,” they
reinsurers – which have to post 100 percent on said.
Multiple sources said that – with the exception
of the recent Vesttoo developments – LOCs have
Talking points performed well as a collateralisation mechanism for

decades.
• Vesttoo scandal has heightened focus on use of LOCs to “It would be a shame if one bad actor or a small
collateralise ceded re for US insurers group of bad actors bring a cloud over a mechanism
• Several billions of dollars of LOCs have been identified invalid in that has served us all very well for decades. Do we
the fallout have to now regulate and capital-load potentially to
• But LOCs have been a long-established functional way of meeting the lowest common denominator? It’s unfortunate
state collateral requirements for alien reinsurers because it’s a construct that has served us so well,” a
• Collateral requirements vary by state and according to the status senior source added.
of a reinsurer A particular concern is the impact any changes
• Concern growing among some execs that post-Vesttoo scrutiny would have on the fronting sector, which
could extend to rating agency/regulatory action which could proportionately has been a more meaningful user of
disrupt the use of LOCs collateralised reinsurance and other unauthorised
reinsurers in transactions.

Analysis: Vesttoo | 15
US collateral requirements vary for reinsurers depending on status

Type of reinsurer Domicile Collateral Note
requirement
Licensed/ Generally US None Reinsurer which is either licensed to write insurance in the state which typically allows it to
accredited also write reinsurance, or licensed in another state with similar standards around credit for
reinsurer reinsurance, and which has met various other requirements of the accrediting state
Trusted reinsurer/ Non-US 100 percent A handful of non-US reinsurers have been authorised through establishing/maintaining a
accredited state-approved multi-beneficiary trust (MBT), and meeting other requirements. A trusted
reinsurer reinsurer posts collateral in the MBT for 100 percent of liabilities due to ceding insurers
Certified reinsurer Typically From 0 to A reinsurer that has been approved by the state to provide reduced collateral for liabilities
non-US 100 percent due to ceding insurers. Must be domiciled in “qualified jurisdiction” and have two interactive
financial strength ratings from AM Best, Fitch, Moody’s, S&P or other NRSRO
Reciprocal Typically None Reinsurer that has been approved by the state as exempt from collateral requirements for
jurisdiction non-US liabilities due to ceding insurers. Must have RBC score of 300 percent (US) and solvency ratio
reinsurer of 100 percent (EU) or equivalent. No ratings required
Unauthorised Can be both 100 percent An unauthorised reinsurer is required to provide collateral for 100 percent of its liabilities due
reinsurer to US ceding insurers, typically in form of LOC, single beneficiary trust, or cash. The ceding
insurer must receive the collateral, or it will be unable to take credit for the reinsurance
Source: Aon, The Insurer
Changing collateral requirements The key differences between the two classifications
As Aon noted in a report earlier this year, historically, are that certified reinsurers must have two
US state insurance laws required non-US reinsurers commercial ratings, and may still have to post
– or alien reinsurers – to post collateral equal to 100 collateral.
percent of the liabilities they assumed from US ceding
insurers. The cedant would otherwise be hit with a US Concerns of LOC change downplayed
statutory accounting penalty. At least one reinsurance industry senior executive
But in the last 15 years there have been significant told this publication that the sector may need to
changes in US collateral requirements. In many coordinate with rating agencies and regulators to
instances, state legislatures have reduced the ensure that there are no unintended Vesttoo-related
percentage of liabilities reinsurers are reactions impacting the use of LOCs.
required to post collateral at. Others have sought to downplay the
In 2018 Florida became the first state threat, however.
to allow non-US reinsurers to post It would be a shame if one One senior reinsurance broking
reduced amounts of collateral subject to bad actor or a small group of executive said that while there will be
certain requirements being met, a move greater scrutiny among counterparties
that was followed by a number of other
bad actors bring a cloud over and users of LOCs to ensure that all the
states. a mechanism that has served collateral posted is legitimate, there is
In 2011, the National Association of us all very well for decades no underlying reason for regulators to
Insurance Commissioners formally change the view that a valid LOC is as
introduced so-called certified reinsurers, good as cash.
which are permitted to post reduced “Would the regulator and ratings
amounts of collateral for liabilities due to US cedants. agencies be wise to ask the question, ‘Have you done
This was followed by the Covered Agreement these things and can you show it to us?’” they said.
between the EU and US six years ago, which aimed to “I think that’s an entirely reasonable response to
eliminate collateral requirements for EU reinsurers something that appears to be just a massive fraud.
that meet certain prerequisites. Although there’s always the law of unintended
In 2019, revisions to this agreement extended its consequences, I’m not anticipating any change in
provisions to jurisdictions outside the EU and UK capital charges.”
which have strong insurance laws and regulations, The executive suggested parties to LOCs are unlikely
share information with US regulators and waive to object to any request to provide clarification
collateral requirements for US reinsurers operating documentation providing evidence that the collateral
in their domicile. This led to the emergence of the is valid in order to receive full capital credit.
RJR term. As the table shows, certified reinsurers and “I don’t think they would object to providing that
RJRs are required to meet a series of conditions and to to a regulator at all, in fact I’m sure they’d actually be
apply for the status at state level. pleased to do so,” they concluded.

16 | Viewpoint: Cyber
Is there correlation between

major cyber events and broad
equity market performance?
Guy Carpenter’s Anthony Cordonnier and Erica 500 index after a cyber attack is very similar to the
Davis highlight new research which can help observed results following hurricanes.
The nature and consequences of cyber and natural
(re)insurers make informed decisions about catastrophe events are in stark contrast with major
capital deployment historical events that have caused significant impacts
on stock markets, such as the 11 September 2001
I s there correlation between cyber events and stock

market performance? The latest research conducted
by Guy Carpenter and the Marsh McLennan Cyber Risk
terror attacks, Lehman Brothers’ bankruptcy, the
Covid-19 crash and the Russian invasion of Ukraine.
Such comparisons provide us with the foundation
Intelligence Center sets out to answer this compelling to conduct future research into the likelihood of any
question. The research addresses long-held scepticism counterfactual cyber scenarios that might “escape”
among the investment community that a systemic cyber into the broader economy and impact investor
catastrophe event would result in a wide-ranging stock confidence.
market downturn. This has been the reason behind Our research indicates the lack of statistical
many ILS investors’ reluctance to deploy capital in cyber significance between cyber events and stock market
transactions for the fear of a “double-whammy” in the performance. This data-driven support, coupled
aftermath of a widespread cyber attack. with the continuous advancement in loss-mitigating
The report, titled “Double-Whammy? Examining technologies such as AI-enabled cyber management
the Correlation between Major Cyber Events tools and risk transfer mechanisms including cyber
and Broad Market Performance”, evaluates four catastrophe excess of loss structures, presents a
categories of historical major cyber incidents: a mass prime opportunity for ILS investors to enter the
breach or vulnerability event, mass service outage, ever-expanding cyber market and diversify their
critical infrastructure compromise and stock market existing portfolios. The broader
compromise. Our study demonstrates that the effect (re)insurance community can also leverage the
of a cyber event falling within the random noise in research findings to make informed decisions
the market does not cause a lasting impact on stock about capital deployment, in order to support the
market performance. sustainable growth of the cyber market.
The report also considers the impact of cyber Guy Carpenter’s global cyber practice is a
events versus natural catastrophes, as both types of dedicated team of brokers, product innovators
events tend to result in large one-time financial costs and analytic experts advancing the role of cyber
rather than long-term strategic shifts in economic reinsurance and retrocession. Guy Carpenter utilises
Anthony
activity or investment. As historical performance on Cordonnier and our global footprint and insights across the Marsh
key stock indices reveals, both event types do not Erica Davis McLennan network to bring superior placement
drastically impact companies’ operations and future are global design, peer benchmarking analysis, market
co-heads of
revenue streams to create a market sell-off. In fact, cyber at Guy intelligence and industry-transforming affirmative
the average 30-day performance impact of the S&P Carpenter and silent cyber aggregation modelling.

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18 | Analysis: Cyber
Reinsurers showing increased

cyber appetite ahead of 1.1
The Insurer examines recent developments in the cyber reinsurance market, where
appetite is increasing despite continued concerns over systemic exposures
C yber reinsurance capacity has increased while

buying options continue to expand, with event
covers emerging and even some alternative capital
short-term performance, profitability, with longer-
term sustainability,” he said. “I suspect Munich Re
as well as other reinsurers will be quite eager to see
deals being done – but reinsurers will be keeping how the market has performed over the course of
a close eye on cedants’ performance and systemic 2023.”
exposures at the upcoming renewals. Storer noted that the segment saw several years
The cyber reinsurance market largely stabilised of pricing remediation in response to skyrocketing
at 1.1.2023, according to Erica Davis, global co- numbers of ransomware attacks, followed by better
head of cyber at Guy Carpenter. She noted that performance in 2022.
policyholders have improved risk controls. “In the meantime, we have observed some not-
“In terms of what that means as we exit mid- insignificant rate decreases in the course of this year
year 2023 and head to 1.1.2024, there is increased as [cedants] start to look towards growth again. But
appetite in the reinsurance market,” she said. “Cyber we’ve also heard reports of increases in frequency
has been viewed as a favourable trade in 2023, and particularly around ransomware, as well as new
we expect that to continue at 1.1.2024.” loss trends like emerging privacy risks and third-
Davis continued: “We are finding reinsurers party tracking tools,” he said.
receptive to the changes and improvements that Storer suggested that the focus on short-term
cedants have made across their portfolio, not just performance needs to be balanced with ensuring
with pricing but also with heightened technical this line of business “is really fit for purpose over
acumen in the underwriting.” the long term”.
Chris Storer, head of Munich Re’s cyber centre of “We’ve been quite noisy about the need to
excellence, global and North American reinsurance manage systemic exposure within cyber in the past,
clients, identified two key themes ahead of particularly what we would consider unmanageable
the upcoming 1.1 cyber reinsurance renewals: systemic exposure like cyber war – a truly ruinous
performance, and the management of systemic risk. exposure that could really not only put Munich
“For this renewal, I think it’s all about reconciling Re’s balance sheet at risk, but the whole industry at
large,” he said.
Jonathan Spry, CEO of cyber MGA and modelling
Talking points firm Envelop Risk, said clients are becoming
increasingly sophisticated in the way they are
• Cyber reinsurers posted 101% average net combined ratio for looking to protect their accounts.
“We are seeing clients engage with us in detail
2022 (107% gross): S&P
to discuss the rating and claims environment, and
• ~$12bn global cyber market heavily dependent on reinsurance are increasingly assisting clients with portfolio
(50+% ceded) optimisation.”
• Reinsurers have focused on war exclusions/systemic risk On rates, Spry acknowledged primary pricing
has been under pressure, but he predicted that
management in 2023
this would stabilise in 2024, and said cedants also
• 2023 initiatives include launch of CyberAcuView/Perils loss see value in partnering with reinsurers to manage
index; Beazley Cairney cat bond and growing reinsurance their risk portfolios. “The increase in ransomware is
capacity under focus and has helped with rate stabilisation –
we are also supplying threat intelligence to certain
• Growing ILS interest: “We expect to deploy ILS capital into cyber
clients and are seeing a beneficial feedback loop
re at the 1.1 renewals” predicts Envelop Risk emerging between the supply of data to us as a
• But leading reinsurers Munich Re and Envelop Risk say data reinsurance partner and the use of data as a threat
quality, models and analytics key to success intelligence tool,” he explained.

Analysis: Cyber | 19
War wordings and event Cyber remains on fast track led a pushback against the
definitions revised cyber war wordings
Munich Re – the largest being introduced by Marsh’s
cyber reinsurer – stresses Echo facility.
that clarity on cyber war As previously reported,
wordings remains one of its Marsh is understood to have
top priorities. developed an amended
“When it comes to cyber wording to the recently
war, reinsurers will expect to agreed Lloyd’s Market
$bn
see progress when it comes Association war exclusions,

to the implementation of with Munich Re believed to
new and updated language in be concerned with attempts
underlying policies. We have by the broker to redraw
seen positive developments the boundaries of the cyber
in the course of this year,” product to include certain
Storer said. aspects of conventional war.
The executive said there “Our position hasn’t
have been “slightly different changed in respect of Echo,”
approaches” in London Storer said. “This is still an
and the US around event exposure that we do not
definition. have an appetite for.”
“London has rather pushed a threshold-type Discussing terms and conditions related to war,
approach in terms of determining what is a sizeable Guy Carpenter global co-head of cyber Anthony
event that needs to be excluded,” he said. “We’ve Cordonnier said that the key from a reinsurance
seen the US rather go broker’s perspective is for
for a response-based clients not to have any gap
approach. So slightly
different ways of going
Primary insurers utilise a significant in coverage between the
reinsurance cover they buy
about it, but ultimately amount of reinsurance capacity and the underlying policies
trying to put a frame that they underwrite.
around this particular “That is something
issue and I think all this we’ve been by and large
has been very positive. able to secure under
“I think we’ll still see reinsurance treaties,
continued innovation mostly by our clients being
in this space so we’d very transparent with
expect to see even more reinsurers on what their
clauses, more iteration approach was,” he said.
in the market. But His fellow cyber co-head
what’s most important Davis added that better
is action. I think any clarity in cyber wordings
market that chooses not about systemic risk is
to do anything in respect being seen across the
of cyber war is really industry.
running material risk at “Guy Carpenter has
the moment.” certainly been working
Munich Re this year with clients for years now

20 | Analysis: Cyber
in regard to keeping reinsurers and cedants closely reinsurers, but predicted that intelligent capacity
connected about the direction of war intent,” she would coalesce behind underwriters with proven
said. “As we look towards 1.1 we intend to continue resources and track records.
that work.” “The expertise, particularly in analytics and data
Spry agreed, adding: “We believe general science, required to adequately model cyber risk
reinsurers are doing a good job in following the in aggregation and across portfolios will mean that
fortunes of the clients, while maintaining both capacity is likely to concentrate where expertise
discipline but some flexibility in war exclusions. and advanced analytics are found. Take Envelop, for
The role of infrastructure exposure in coverage and example – we are expecting to add a large handful
appropriate aggregation and tail modelling also of additional capacity providers to our panel in
cannot be overlooked.” 2024, and conversations with potential new entrants
are progressing very well.”
A changed capacity landscape Looking ahead, Munich Re’s Storer said he
Guy Carpenter’s Cordonnier said that expects reinsurance pricing to be
the capacity landscape has changed “rather consistent” at the renewal. “We
over the past 12 months.
“Prior to that, we definitely saw a
We are seeing clients engage hear reports of some new capacity
but, of course, it’s really questionable
shortage of capacity as the market was with us in detail to discuss the whether this is really sufficient to
growing massively and undergoing rating and claims environment, meet the further growing demand,”
some challenges,” he said. “In the last
12 months actually that trend has
and are increasingly assisting he said. Storer said cyber is different
to other traditional lines of business,
reversed, with reinsurers growing clients with portfolio as the exposure is growing and there
appetite and terms and conditions optimisation is an opportunity to increase cyber
stabilising, as we see signs of positive penetration rates.
momentum building in the reinsurance “We don’t necessarily have a demand
market.” issue – it’s really being able to find the
Cordonnier believes there is potential for terms capacity to service that demand,” he said.
and conditions to improve at 1.1.2024, reflective of a Guy Carpenter’s Davis noted that there have been
positive environment following clients doing a lot of 10 consecutive quarters of cyber rate increases on
work on underwriting measures and performance the insurance side, with the broker’s data showing
improving. a compounded increase of 182 percent since 2017.
The executive identifies three different “buckets” “So while rate change has slowed in 2022 and
of reinsurers that Guy Carpenter is working with. there have been selective cases of rate being given
The first is significant players that have grown back in 2023, we’re working off of a much stronger
in the past couple of years and are providing more foundation of pricing adequacy going forward,”
capacity. The second is those that are happy with she said. Cordonnier noted that there may be some
their market share and will grow more or less in changes in structures as clients look at whether
line with the market, which Cordonnier said “are they are getting value for money.
not going to be a major driver of underlying growth Quota share is the predominant cyber
going forward”. reinsurance purchase currently, with stop-loss
“The third bucket is really the one that will treaties the main non-proportional cover bought.
support growth and move the needle in the next “Perhaps 18 months ago they would have been
renewal cycle,” he said. “It is those players that the only purchases available to clients,” Cordonnier
are very small in, or even absent from, the cyber said. “But now there are alternatives available, such
market and have invested in hiring people as heads as occurrence covers, that we are talking a lot about
of cyber, bolstering their actuarial teams, signing now. On the capacity front we’ve seen ILS markets
up to cat models, and re-engaging with reinsurance entering the space, albeit in a selective fashion.
brokers.” All of that contributes to healthy discussions and
Spry acknowledged the growing interest from clients having optionality.”

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22 | Viewpoint: Wordings
Black swans in plain sight

Predicting and assessing catastrophe risk from a systemic cause triggering those covers
remains to be seen.
risk is at the heart of reinsurance, In all catastrophic and systemic loss scenarios, the
but how well has that function been scope of cover and any applicable exclusions will
performed this millennium, and what depend on the drafting of the grants of cover and
breadth of the exclusionary terms regarding both
lessons have been learned? sub-perils and indirect causation. Too often, there
T he terrorist attacks of 9/11 22 years ago stand out

as terrible man-made events that were unexpected
in nature and effect. Since then, we have seen a slew of
can arise avoidable dislocations of risk as between
inwards and outwards covers, including for the
major systemic perils of war, nuclear and cyber. The
natural catastrophes which were unmodelled either as to blackest of swans in the plainest sight include political
their frequency, or the potential for loss from secondary risks which may not form part of war exclusion sub-
perils likely exacerbated by climate change. perils, an issue highlighted in the ongoing Russian
Catastrophe models are based on mathematical aircraft leasing coverage disputes. There remains
assumptions driven by reliable historical an inconsistent approach towards
data, but do not work as well for man- radioactive contamination exclusions.
made catastrophes, especially for One would expect that after
emerging risks such as cyber. Probable The starkest truth is that it Fukushima and with the ongoing
maximum loss modelling has always is usually what we have not concerns about the safety of other
been asked to recognise war and disease
as material risks, but the models failed to
expected that ends up hurting nuclear power plants in Ukraine
especially, there would be greater
anticipate the systemic effects of political the most focus on the limitations of traditional
decisions such as national lockdowns nuclear exclusions, especially as regards
caused by the Covid pandemic, or consequential or secondary perils
sanctions leading to over 400 leased triggered by a nuclear incident.
aircraft not being returned from Russia to foreign The various natural and man-made catastrophes
leasing companies. of this millennium have also confirmed that the
Are those political decisions and their effects so reinsurance market’s approach to aggregation is
surprising in hindsight? cautious and unsuitable for systemic loss scenarios
They should certainly be expected moving forwards, with multiple operating causes. In our ever more
and can no longer be regarded as black swan events. complex and connected world, traditional event-based
Indeed we are told to now expect, amongst other UNL cover will continue to create an uncomfortable
things, heightened geopolitical risks, more severe hard line for cedants who have had to ingest claims
cyber attacks potentially allied to kinetic or hybrid arising from black swan events.
wars, more pandemics, more unpredictable natural ILS reinsurers have become an important part
catastrophes, and generally more uncertainty and of the catastrophe market, but are understandably
risk. reluctant to provide products for risks which cannot
After major unexpected losses the (quite natural) be priced and modelled reliably. We have learned that
knee-jerk reaction of (re)insurers is to exclude the even if natural cats can be predicted, many man-made
peril: the underwriting equivalent of shutting the Simon ones cannot. The starkest truth is that it is usually
stable door after the horse has bolted. Longer term, Kilgour is a what we have not expected that ends up hurting the
London-based
however, it is self-evident that the industry needs partner in the
most. Curiously, there is no definition of catastrophe
to offer solutions to risk events if it is to be relevant. insurance and under English law. This may be a good thing from a
Hence, the advent of the Terrorism Risk Insurance Act reinsurance reinsurance perspective, as our concept of what it can
group of
and a dynamic private terrorism market post 9/11. leading law
be is likely to have to evolve as more black swans are
Cover for systemic cyber threats in a now largely firm CMS discovered…
digitised world has become a major industry topic.
However, blanket cyber exclusions cannot work Simon Kilgour is a London-based partner in the insurance and reinsurance
and there remains concern about cover for state- group of leading law firm CMS. He specialises in reinsurance and created
sponsored cyber attacks and the related burden of the award-winning ReWord database which has been used by many of the
leading global reinsurers to get comparative advice on over 1,500 clause
proving attribution. Coverage for secondary or sub-
variants. ReWord was recently updated to include analysis of war, nuclear,
perils will continue to emerge, however, the extent to terrorism, cyber and communicable disease exclusions.
which carriers appreciate the potential for aggregated

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24 | Analysis: Top 10 Reinsurance Brokers
A s the dust settles following several years of ground-

breaking M&A deals, our annual Top 10 Reinsurance
Broker Rankings – based on 2022 revenue estimates
benefits of rampant hiring through the recent sector
consolidation.
However, our Top 10 Reinsurance Broker Rankings
– features a more stable line-up, with Gallagher Re and now adopts a more defined character with companies
Howden Tiger cementing their positions as the third and at the top of the pyramid cementing their positions,
fourth biggest reinsurance brokers. suggesting a break – at least temporarily – from the
It also comes amid organic growth tailwinds for significant movements of the last few years.
reinsurance intermediaries that are only expected Our survey shows both the “new” big three brokers
to strengthen in 2023 owing to a generational hard and the challenger firms are well-positioned for
market in property cat, a resurgent cat bond market further growth, aided by the tailwinds of a hardening
and continued strong demand from buyers. reinsurance market and the consequent increase of
After years of a very predictable picture, Marsh broker commissions.
McLennan’s $5.6bn acquisition of JLT, announced in
2018 and closed in the spring of 2019, was the starting Fair comparisons
shot for a period of M&A activity which would have So how does the final line-up look for 2022 and what
a significant impact on the makeup of the global does it tell us about the direction of travel for the
reinsurance brokerage sector. sector in 2023?
Aon’s subsequent pursuit of Willis Towers Watson, First a few caveats. For the purposes of our updated
which began in 2020 and continued in 2021, had Top 10 Reinsurance Broker Rankings – now in its fifth
looked set to create a new undisputed leader in the year – we have chosen to present all Willis Re and
reinsurance segment, opening a big gap on Guy Gallagher Re pre-2020 pro forma revenues separately
Carpenter in second place. in order to offer a clearer representation of the
But competition regulators forced the divestment of relative significance of both companies before their
Willis Re as part of the proposed transaction, opening merger in 2021.
the door for the positioning of Arthur J Gallagher We have applied the same criteria to the new
as the third largest reinsurance broker through Howden Tiger entity, breaking down revenues
Gallagher Re. separately between TigerRisk and Howden RE –
Despite the Aon-WTW deal being nixed by US which previously occupied fourth and fifth place
antitrust regulators, Gallagher’s $3.25bn acquisition respectively.
of Willis Re went ahead. The proposed $1.6bn While the big three revenues are all based on
combination of Howden RE and TigerRisk was then official disclosures or well-sourced information for
announced last year and completed in January 2023, the year to 31 December 2022, Howden Tiger is among
with the new Howden Tiger entity taking fourth place two of our top 10 operating with financial years that
in this year’s ranking. span 2022 and 2023.
As the 2022 revenue figures compiled in our Howden Tiger’s parent reports with a 30 September
latest survey show, the hive of activity among the year-end. The revenue numbers we have included for
next tier of intermediaries continues, with all firms the separate and combined firms are consequently
delivering double-digit growth as they see the ahead of the reporting cycle for the majority of the

Analysis: Top 10 Reinsurance Brokers | 25
Top 10 reinsurance brokers by revenue ($mn)

2022 2021 2020 2019 2018 22/21 Notes
% chg
1 Aon’s 2,190 1,997 1,814 1,686 1,563 9.7% Aon's Reinsurance Solutions mantains the lead in the
Reinsurance table for the fifth consecutive year, opening a slightly
Solutions* bigger gap to second placed Guy Carpenter. It reported 8%
organic growth for 2022, driven by strong net new business
generation in treaty, as well as solid growth in facultative
placements and the Strategy and Technology Group
2 Guy 2,020 1,867 1,696 1,598 1,442 8.2% Marsh McLennan reported 9% underlying revenue growth
Carpenter* for Guy Carpenter in 2022 (including an impressive 11%
in Q1, ahead of the 7% of its main competitor). It is worth
considering that – contrary to Aon – Guy Carpenter's
organic growth figures include fiduciary income. Figures for
2019 and 2018 include JLT Re
745 1,022 966 Gallagher Re cements its third position in the ranking –
Willis Re Willis Re Willis Re following the acquisition of Willis Re in late 2021 – with
** ** ** our estimate that revenue (excluding fac reinsurance and
3 Gallagher investment income) exceeded $1bn in 2022 for the now
1,000+ 925 130 100 70 8.1%
Re ** fully integrated business. In earnings calls following the
Gallagher Gallagher Gallagher latest market updates, parent AJG revealed Gallagher Re
Re ** Re ** Re ** had grown organic revenues by 12% and 11% in the first
and second quarter of 2023
180+ 140+ 125 100+ Consolidated in a single line this year, our estimate
TigerRisk TigerRisk TigerRisk TigerRisk represents a 28.6% increase compared to the sum of prior
year revenues of TigerRisk and Howden Re (including
170 (71 ex (52 ex 45 (ex Bowood). Sources pointed to strong growth in UK specialty
4 Howden (115 ex Bowood) Bowood) Bowood)
450 28.6% treaty as well as casualty treaty globally. Consortia
Tiger** Bowood) Howden Howden Howden business, international fac, US treaty and SabRE also
Howden Re Re Re performed well. The proforma revenue figure corresponds
Re to the financial year started 1 October 2022, a period that
lies ahead of its competitors' reporting cycle
5 Lockton 210 155 87 55 50 35.5% Revenue figure understood to have grown c35% in 2022,
Re** the second highest across all brokers on the top-10. The
business now has 350+ staff globally. Key new offices in
Miami, Zurich and Stamford
6 BMS Re** 158.6 113 95 68 65 40.1% Based on our estimates, 2022 revenue growth amounted
to an impressive 40%, allowing BMS Re to leapfrog one
position in 2022. Sources said the firm saw strong growth
across its US, LatAm and Spanish operation, driven by new
business, while its UK platform also grew rapidly driven by
its Special Risks Team, the impact of new business, hiring
and strong demand. BMS Re's figure for 2020 has been
reinstated to include the acquisition of Trean
7 Acrisure 150 125 100 80 68 20.0% Revenues in 2022 represent a 20% increase with respect
Re** to the previous year. Growth focused in North America but
also London wholesale. Also, Acrisure Re Capital Advisory
Solutions business ARCAS – which was launched in 2021 –
having an impact in 2022 revenue figures
8 UIB* 80.0 79.7 69.6 65.4 67.4 0.4% UIB takes up eight place in the rankings with $80mn in
revenues. Reinsurance accounted for around 90% of the full
group revenues which surpassed £70mn for the first time in
2022. Growth was reported at 12% (measured in GBP) for
facultative and treaty reinsurance, with double digit growth
in many offices including Korea, Colombia and Turkey
9 Holborn* 58.8 50.4 47.0 42.0 40.0 16.7% Net brokerage stood at $58.8mn in 2022. Good traction in
new business, particularly in the regional and super-regional
insurance space. The company has also added a number of
cyber-based treaties and developed a successful umbrella
program for small to mid-sized based insurers. New and
existing business growth in the Farm & Ranch sector
Inver Re** 40 n/a - - - - Revenues for the reinsurance broker, which was launched
in late 2021 following the acquisition of Corant Global by
Ardonagh, were understood to have hovered around $40mn
Subtotal 6,357 5,662 4,995 4,893 4,476
*Official revenue number; **The Insurer estimate

other brokers in the rankings, not making for a like- was driven by an impressive first quarter record of 11
for-like comparison. percent, well ahead of its main competitor's 7 percent.
Meanwhile, Lockton Re’s parent reports with a 30 However, it is worth considering that – contrary to
April year-end, which also puts its revenue numbers Aon – Guy Carpenter's organic growth figures include
ahead of the rest of the reporters. fiduciary income, something which has had a net
The gap between Howden Tiger and Lockton Re in positive effect over the last year because of higher
our rankings is not likely to be fully accounted for by interest rates.
the differentiating accounting dates, however. Meanwhile Gallagher Re is estimated to have
Yet, a like-for-like comparison between Lockton Re generated revenues in excess of $1bn for the year
in fifth and BMS Re in sixth could see a meaningful and a 8 percent higher than the previous year. It is
narrowing of the gap given the weighting of important to note that Gallagher Re’s revenue figure
reinsurance revenues to the first quarter of the year. excludes facultative reinsurance which is accounted
There are a couple of additional considerations for outside the reinsurance unit within the AJG group.
regarding the historical data for some of the top The figure also excludes investment income.
players. Gallagher Re is followed by Howden Tiger in fourth
We have used the $745mn 2020 pro forma position, consolidating the fourth and fifth places
revenue number for the acquired Willis Re occupied by TigerRisk and Howden RE in the previous
business referenced by run of the survey.
Gallagher in its investor The "new" Big-3 plus Howden Tiger account Sources have estimated
presentation when the for ~90% of the total reinsurance market... that pro forma revenues
deal was announced in (2022 revenues in $mn) for the year ended 30
2021. 2,190 September 2023 are likely
Our 2019 and 2018 2,020 to top $450mn (including
numbers for Willis Re the Bowood business),
were both estimates, a figure that would
with the 2019 estimate represent a 28.6 percent
including $350mn of 1,000+ increase compared to the
facultative business not 700 sum of the two merged
included in the sale to 450 companies.
Gallagher, while the 2018 The firm’s growth
number did not include momentum is understood
Rest of
facultative but did include intermediaries
to have been driven by
Reinsurance Solutions
Miller. UK specialty treaty as
Note: figures for Gallagher Re, Howden Tiger and rest of intermediaries estimated by The Insurer
As for Guy Carpenter, well as casualty treaty
Source: Company releases, The Insurer estimates
although Marsh globally. Consortia
McLennan’s acquisition of JLT only closed at the start business, international facultative and US treaty were
of 2019's second quarter, we have used reinstated also described by sources to be contributing factors,
10-K revenue figures provided by Guy Carpenter’s with newly launched global MGA program arm SabRE
parent that factor in JLT Re turnover as if the firm had another standout performer.
been acquired at 1 January 2018 for full prior-year
comparisons. Hard market tailwinds
Another key theme of this year’s survey is the
A view from the top opportunity afforded to intermediaries by the hard
As shown by the results of our survey, Aon’s market and its impact on the top line.
Reinsurance Solutions continues to lead the rankings As cat/all-risk reinsurance rates continue to rise,
for the fifth consecutive year, widening the gap premium volumes coming through proportional
slightly over second-placed Guy Carpenter. or quota share treaties expand, which feeds into
The unit grew overall revenues by 10 percent in increasing commission revenue for reinsurance
2022 and reported 8 percent organic growth driven brokers.
by strong net new business generation in treaty, as The tighter treaty market, in turn, drives strong
well as solid growth in facultative placements and its demand for facultative reinsurance.
Strategy and Technology Group. This is a particular positive for Aon and Guy
Rival Guy Carpenter grew revenues by 8 percent in Carpenter with their large in-house facultative
the year but reported organic growth of 9 percent – 1 practices (Gallagher Re less so because WTW retained
point higher than Aon’s reinsurance business. client facultative), as well as their competitors
Guy Carpenter’s organic growth advantage over Aon including Howden Tiger. Perhaps unsurprisingly, it

© Adobe Stock /scharfsinn86
is the challenger firms that have delivered some of the the offices including Korea, Colombia and Turkey.
fastest growth in this environment, building rapidly off a Meanwhile, New York-based Holborn clinched
smaller base. ninth place posting revenues of $58.8mn, up 16.7
Four of the intermediaries positioned below Gallagher percent from 2021, with good traction in new
Re in our rankings delivered revenue growth of 20 business, particularly in the regional and super-
percent or more in 2022. regional insurance space.
Fifth-placed Lockton Re is one of the growth stories The company has also added a number of cyber-
of 2022, with revenues estimated at around $210mn, 35 based treaties and developed a successful umbrella
percent higher than in the previous year. program for small to mid-sized insurers.
The unit has been building out since being rebooted It recorded new and existing business growth
under a new management team led by Tim Gardner – momentum in the farm and ranch sector as well as
who joined from Guy Carpenter four years ago – and securing a major reinsurance program for a leading
now has over 350 staff members, with new key offices in US crop insurer.
Miami, Zurich and Stamford. Holborn’s revenue figure was reported on a net
BMS Re is the other growth story of the year, and brokerage basis and exclusive of income from
is understood to have recorded the highest top-line consulting, interest or other income, in contrast
expansion across the with some of the
top 10 reinsurance Organic growth for Aon Reinsurance Solutions and Guy Carpenter other firms in our
brokers at just over (in %)
survey.
40 percent. Aon (Reinsurance Solutions) Guy Carpenter
As we have
As a result, BMS reported in
15
Re’s revenues are previous
estimated to have 13 13 years, there
12 12
reached $158.6mn in 11 11
are significant
2022, leapfrogging 10 differences in the
9 9 9 9 9 9 9 9 9
Acrisure Re in our 8
way companies
latest survey. 7 7 7 7 7 report reinsurance
6
Although he 5 5 5
revenues, with
would not comment some participants
on specific numbers, contending that
BMS Re CEO Pete certain figures
0
Chandler told this provided to this
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023
publication: “It publication do not
Source: Companies' quarterly reports
was truly a year correlate with the
where our historical investments in talent and analytics, definition of “pure cedant-based reinsurance” that
combined with our focused specialist strategies, aligned others are reporting.
seamlessly with the firming market conditions to
produce a strong outcome in 2022.” Inver Re, the new entrant
It is thought that the firm saw strong growth across its The consolidation of TigerRisk and Howden RE
US, Latin American and Spanish operations, driven by in this year’s rankings has meant an uplift for all
new business, while its UK platform also grew rapidly positions below fourth place as well as opening the
driven by its special risks team, the impact of new door for a new entrant in our top 10.
business, hiring and strong demand. Based on our research, this place corresponds to
Despite being overtaken by BMS Re in our latest Ardonagh Group-owned Inver Re.
survey, Acrisure Re is also understood to have Revenues for the reinsurance broker, which was
maintained strong momentum in 2022. launched in late 2021 following the acquisition of
The firm is thought to have grown by 20 percent, Corant Global by Ardonagh, were understood to have
reaching $150mn in revenues, with most of the hovered around $40mn in 2022, putting it in 10th
expansion coming from North America as well as from place behind Holborn.
London wholesale business. Inver Re was unveiled by the UK consolidator
Acrisure Re’s capital advisory and solutions business, in June 2021 with a bold aim to become a top-five
which was launched in 2021, is also understood to have global market player in reinsurance. However, it has
had an impact on 2022 revenue. suffered from a recent wave of senior departures at
UIB maintained its relative position in the rankings Ardonagh, which has included Inver Re CEO Steve
– occupying eighth place – as it generated reinsurance Hearn who stepped down in July having joined
revenues of $80mn with double digit growth in many of Ardonagh as part of the acquisition of Corant Global.

Reinsurance
Property / Casualty / Specialty
Learn more at aspen.co

30 | Interview: Jill Beggs
Hard markets are here to stay

Jill Beggs, head of North America reinsurance at Everest, explains how insurers are reacting
to increased insured losses in North America and the company’s strategy for this key market
and recognise that we are in an elevated risk
How has Everest’s North America reinsurance book
environment. Price-taking has slowed in several
grown over the past year?
lines of business in the casualty space and cycle
In North America, we grew about 5 percent from management is always in our sights.
2021 to 2022 despite pulling back capacity because
of lacklustre pricing and terms and conditions. But, What are the key renewal topics you anticipate in
given the fundamental reset we saw at 1.1, we have the run-up to 1.1?
grown about 20 percent through the first half of the
year, and that growth is widespread and includes First and foremost, property rates must continue to
all geographies and lines of business. Growth is rise. We can’t say that enough. Market conditions
being driven largely by increased shares of our and the macroeconomic dynamic will likely remain
existing clients’ business, as they are unchanged, with a significant capital
looking to do more with Everest due to gap between supply and demand, in
our constructive approach to market
conditions.
First and foremost, property addition to continued nat cat volatility
and heightened risk. So, the market
Our margins are expanding and that rates must continue to rise. will remain hard well into 2024 and
has continued as cat losses relative We can’t say that enough potentially into 2025. Second is casualty
to book value remain low and our – the market needs to push rate due
attritional loss ratio is performing well. to social inflation and other factors
But we have cut back in some areas, and the increases we have seen over
so it is not only a growth story. For example, we the past several years are not enough and need to
reduced our participation in Florida following our continue.
financial analysis of cedants in the state, including
their financial stability and their ability to secure What are Everest Reinsurance North America’s
appropriate terms and conditions for the risks goals for the rest of 2023 and 2024?
posed. We have also grown year-over-year in areas
like cyber, where we have added talent to selectively At Everest, we put our client relationships first. We
deploy capacity to our core clients. make it easy for our clients and brokers to work
with us. In this environment, we believe having
Do you think the hard market will remain? deep business expertise is more critical than ever.
So, we are rolling out several ways to enhance our
We expect to see continued and even increased capabilities and improve our assessment of risk,
demand for property coverage at prices and utilising the breadth of data and experience we have
terms and conditions that remain elevated. Rates at Everest to strategise and optimise our portfolio.
are also up in the primary market for casualty Jill Beggs Finally, cycle management is critical, especially in
cover. Looking back over the past several years, is head of certain lines, as we put our new capital to use. The
North America
attachment points are up and terms are better. reinsurance at team is very excited to be able to support our clients
We partner with the best clients in this space Everest and brokers in a more meaningful way.

32 | Interview: Andy Marcell
Aon’s Marcell: Stable 1.1 cat market

expected amid increasing competition
A bsent any major cat events between now and 1
January, Aon’s newly appointed CEO of Risk Capital
Talking points
Andy Marcell expects a significantly more orderly
renewal as he suggested increased competition among
reinsurers to deploy capacity could put downwards • More orderly cat renewal expected than at 1 January 2023
pressure on pricing for some buyers. • Competition for “preferred partners” could lead to some downwards
In a wide-ranging interview with The Insurer as pressure on pricing
part of our #ReinsuranceMonth series, the executive • Demand for cat limit from European and US insurers expected to rise
also talked about addressing the coverage crisis in 5-10% on average
places like California; harnessing capabilities to • Return to strong supply of ILS capacity for cat bonds has benefited
meet the evolving and complex needs of corporate buyers
insureds; the retro market; intellectual property • US casualty market is “robust”, but reinsurers expected to push for lower
opportunities and the talent war. cedes
Summarising his outlook for the 1 January • Casualty market expected to be stable outside D&O
renewal, Marcell said: “Following a period of market • Advanced data and analytics key to attracting capital to risk in areas
challenges, there are currently no factors placing where carriers have been retrenching, such as California
significant upwards pressure on reinsurance rates. • Marcell’s new Risk Capital leadership role oversees Aon’s commercial
But at the same time, capital is not entering in risk and reinsurance arms, and creates a unified risk analytics team
large volumes and greater limits will be sought by
insurers, so there won’t be a huge softening. more than adequate to satisfy the needs of most of
“When we look at Aon’s cat portfolio we see rate our clients, and some of those buying protection at
adequacy – the internal rate of return on capital 1 January bought additional coverage through the
for reinsurers at 1-in-250 for example looks pretty year.
strong.” “Reinsurers will now be competing to reinsure
Marcell, who also remains CEO of Aon’s a preferred partner, and this may result in some
Reinsurance Solutions division pending the downwards pressure on rates,” Marcell suggested.
appointment of a successor, noted that while the He predicted that mitigating any downward
rate hardening may have made the headlines, pressure will be increased limit purchasing
it was the structural change to cat programs of between 5 percent and 10 percent on
that was most significant, along with sourcing average for the US and Europe, as well as
capacity for secondary perils. private transactions that allow some cedants
He added that after a challenging and at to “optimise” capital lower down to counter
times chaotic 1 January renewal, a much more the impact of higher retentions on core cat
orderly market has emerged with a flight to programs.
quality in the minds of reinsurers towards the While there may be some further incremental
insurers they deem to be preferred partners. traditional capital entering the cat space, it will
“Given the talk of a flight to quality, there not be sufficient to dramatically change
was still plenty of capacity – it was supply and demand dynamics,

Interview: Andy Marcell | 33
Marcell suggested. He also said he does not expect been evidenced in the financial performance of
a significant expansion of the retro market, noting insurance companies over the past eight months. So
that some big users of the product such as Lloyd’s I would expect the market to be reasonably stable,
syndicates had demonstrated they can operate with aside from D&O coverage, which is a much more
significantly less retro than previously purchased challenging marketplace because of the precipitous
with the help of portfolio management technology drop in rates,” Marcell suggested.
and tools alongside better-structured cat programs.
But the impact on buyers of a hard traditional The California issue
reinsurance market has been partially A further trend this year has been the
offset by a return to strong supply of retrenchment of a number of large US
ILS capacity for cat bond transactions, insurers from some cat-exposed states,
with the market on course for record To attract capital to risk most notably California’s admitted
issuance levels this year. personal lines market.
That represents a dramatic shift from
requires advanced data and In his new role, Marcell is overseeing
late last year, when placing cat bonds analytics. How else can we Aon’s commercial risk and reinsurance
of a relatively modest $250mn size was quantify the cumulative businesses, as well as the creation of
challenging. a unified risk analytics team in the
“ILS pricing has decreased to pre-
probability of various Risk Capital division to help create
Ian levels due to cat bonds proving outcomes and then segment new capacity for risks like climate and
themselves as a mechanism that can that analysis into return cyber.
deal with tail risk, and performing The aim is to increase collaboration
in line with cedant and investor
periods which allow insurers and coordination across the firm to
expectations. and reinsurers to allocate a bring capabilities to clients in a way
“We have helped many clients to certain amount of capital to that serves the needs of each individual
navigate potential volatility and find client.
efficiency in buying major limit through
that risk? “Aon is striving to deliver agnostic
incorporating alternative capital into Aon’s CEO of Risk Capital access to capital for its insurer and
their risk transfer strategies. This has Andy Marcell corporate clients. This creates greater
the effect of reducing the stress on their efficiency in the marketplace and
cat programs and transferring risk helps clients to maintain business
at stabilised prices, and I think it will resilience when faced with operational
continue,” said the executive. headwinds. It also provides clients with more
strategic options, ultimately driving better business
Robust US casualty market
Another feature of 2023 has been downward
movement on cede commissions on casualty quota Waging the talent war
shares.
But outside D&O, Marcell said he expects the According to Marcell, attracting and retaining talent is a core theme for
casualty market to be relatively stable at the the firm. And he suggested that being able to articulate the culture of the
upcoming renewals, as he pointed to the health of company and what its future will be is key to delivering on that theme.
“If you’re a reinsurance broker then compensation and benefits are of
the underlying business.
course important. However, working in a firm whose culture allows you to
“If you look at US casualty, the market is quite
serve your clients with superior tools and capabilities – and therefore be
robust. Not everyone shares that view, but from more relevant to those clients – means that you will have a more interesting
my perspective it seems to me that it’s a relatively career and a more diversified life in terms of what you can learn and the
good time to be an insurance company in the US. If journey you can take,” said the executive.
you’re a reinsurer and a lot of your transactions are Marcell also highlighted the advantages in the more “unified” approach
proportional – which they are in casualty – there Aon is looking to bring with its new management structure to deliver
are a lot of tailwinds driving performance,” he solutions to clients.
commented. “As clients have been forced to take more retentions, it is incredibly
The executive said he expects reinsurers to push important for them to have access to a team of people who have capital
for lower cedes, with their case built around reserve models, and pricing and reserving solutions in the same ecosystem, that
can be off-the-shelf or bespoke to suit the client. By leveraging those
development, potential frequency and severity,
solutions, the Aon team can analyse each client’s unique mix of business
the performance of old years and whether there is
through strategic consulting and then develop a strategy for those clients as
pricing adequacy, saying they need to assume the to how they can adjust the mix of business to achieve the desired returns,
risk at lower acquisition costs for them. and provide feedback to stakeholders,” he continued.
“I am not sure that any reinsurer concerns have

34 | Interview: Andy Marcell
decisions,” Marcell explained. help our clients understand potential outcomes and
Commenting on Aon’s potential role in how the wide range of risks with which they are
bringing solutions and capacity to places like engaging can be measured,” the executive further
California where carriers are retrenching, the commented.
executive suggested the key is to provide a better
understanding of the risk. Keeping it private
“To attract capital to risk requires advanced Asked about the trend towards the non-admitted or
data and analytics. How else can we quantify the E&S market as admitted carriers have retrenched,
cumulative probability of various outcomes and Marcell suggested it represented a “permanent
then segment that analysis into return periods shift”, given the desire among insurers for flexibility
which allow insurers and reinsurers to allocate a of rate and form to try to get a better return.
certain amount of capital to that risk?” he added. “The irony of regulation in this particular case is
Marcell highlighted the firm’s in-house Impact that the more the states seek to control the admitted
Forecasting rates, the more
modelling Global reinsurer capital ($bn) carriers want to
capabilities, become non-
which have been admitted. What
obtaining licences we don’t want to
in peak cat zone happen is for the
states, as well as public market
the use of vendor to take an even
models. bigger share
With Aon of the private
developing its market.
own models, it “The private
can provide a market needs
sustainable view to be able to
of risk to help provide solutions
clients create their Sources: Company financial statements / Aon’s Reinsurance Solutions / Aon Securities Inc. to solve coverage
own view of risk, issues. In order
empowering them to make decisions about risk and to do that, it needs to understand the risk and have
return when deploying capital – whether that is an the flexibility to change rates to adjust for the ever-
insurance company, private equity firm or large changing reality of climate change,” he commented.
corporation. Climate change is just one area Aon is looking to
“That can also be extended to California,” he address with its new structure, which also sees its
suggested, noting the “deeply distressed” state of the health, wealth and talent businesses come together
personal lines segment in the Golden State. under a Human Capital unit led by Lambros
“Our role is to use advanced data and analytics to Lambrou.
“We made the structural change in recognition of
the complexity of the sectors in which we operate –
IP demand continues to grow whether that be, among other areas, cyber, critical
cat, rising insurance rates, or the focus of large
Intellectual property (IP) has been identified as an area of significant growth corporates on their capital positions and the value
potential by Aon in the last couple of years, with the firm acting as one of of the insurance they’re purchasing,” said Marcell.
the market-makers. Bringing together its nearly 1,000-strong
Marcell said that despite the recent issues involving a limited number reinsurance analytics division with the hundreds in
of transactions related to Vesttoo, the demand for the IP product being its commercial risk team on a single platform called
spearheaded by Aon has not been affected, noting that the beleaguered Aon Advanced Analytics will allow the firm to help
insurtech was just one source of capital in the nascent marketplace. clients better understand risk, quality, what they
“This mechanism is efficient relative to diluting an equity stake, so the buy and how they buy, with a view to unlocking
thesis holds and demand has actually increased over the past six months, capital, he explained.
rather than diminished,” he continued.
“You can’t fully achieve those objectives when
“When there is a distraction, there’s a slowdown, but it’s not going to be
you’re running a series of separate P&Ls – you have
meaningful on the market going forward,” the executive said, adding that
the firm has also had interest on the supply side from carriers looking to to think holistically about that progression, with
enter the space. Human Capital and Risk Capital,” the executive
added.

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business with more than
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36 | Analysis: Aviation
Global aviation lessor disputes drop

below $10bn following AerCap settlement
A landmark settlement reached by the world’s largest aircraft lessor AerCap has seen the
collective value of legal cases launched in the UK, Ireland and US by aircraft leasing firms
against insurers over the loss of hundreds of planes stuck in Russia since its invasion of
Ukraine fall to $9.7bn, analysis by The Insurer shows
L ondon has emerged as the clear destination of

choice for lessors seeking clawback for the loss of
trapped aircraft.
London emerges as destination
of choice for lessor disputes
The popularity of London as a jurisdiction for claims
The Insurer has tracked 80 disputes filed in can be partially attributed to its prominence as centre
London’s High Court with a collective value of for commercial (re)insurance law, and also to its
$7.4bn against more than 30 separate insurers, ability to actively manage large-scale and high-value
reinsurers and MGAs as of 5 September. complex test and grouped cases – as it did in 2020 and
London has seen a recent flood of high-value 2021 in relation to Covid-19-related BI cases.
claims filed against insurers, including four separate The UK’s commercial court is currently hearing
actions from US-headquartered lessor Aircastle, claims concerning Russia-related aviation coverage
which now has claims totalling almost $300mn disputes under two separately managed group claims.
moving through London’s High Court. The first concerns so-called contingent and possessed
Other notable claims made public in the last insurance policies brought by lessors, while the
month include the $688mn claim brought by second concerns so-called operator policies which
lessor Deep Sky as well as the separate $671mn were taken out by the lessee airlines.
and $553mn claims brought by units of Celestial The cases filed in London all similarly argue that
Aviation. aircraft leased into Russia are covered by policies
July and August also saw 25 fresh legal claims filed against war or theft, but insurers point out the planes
by aviation lessors, parts manufacturers, service are undamaged and might yet be returned.
companies and their subsidiaries. The claimants Claimants are typically reserving rights on both
– all of whom are being advised by the London all-risk and war covers although the claims are
“Magic Circle” firm Clifford Chance – include the complicated by issues of coverage wordings, causation
world’s third largest lessor Avolon, China’s state- triggers, cancellation clauses and the impact of
owned lessor BOC Aviation, KDAC Aircraft Trading, Western sanctions.
GY Aviation, Tobol Aviation Leasing, Falcon 2019
and Sapphire Leasing. Many of the latest actions AerCap claim to be tested in 2024 group cases
were filed by subsidiaries or associates of Dublin- The first grouped claim will seek to handle areas
headquartered Dubai Aerospace Enterprises (DAE), of principle in a number of disputes including
which is already pursuing an $875mn suit claim AerCap’s claim which remains the largest dispute to
against insurers over recoveries for assets trapped date, despite the reduction in its value following the
in Russia. settlement talks.

Analysis: Aviation | 37
The five largest UK lessor claims

lawyers described as a “mega trial”, which is expected
to begin in October 2024.
Lessor Size of Defendants Lessors DAE, Merx Aviation, KDAC Aviation Finance
claim and DAE subsidiary Falcon 2019 are set to join AerCap
AerCap Ireland $2.75bn AIG Europe, Lloyd’s Insurance in the “mega trial”. DAE and Falcon are suing 11
Company, Fidelis, Swiss Re insurers, including Lloyd’s, AIG, Chubb and Swiss
& Chubb Re, over 21 aircraft and equipment valued at almost
Dubai Aerospace Enterprise (DAE) $875mn Lloyd’s Insurance Company, $900mn under all-risks policies, or for just under
& others HDI, Chubb, Fidelis & 7 others $800mn under war-risks policy limits.
Merx is claiming more than $255mn over the
Deep Sky Leasing & others $688mn Fidelis, Global Aerospace, alleged loss of six aircraft, while KDAC is suing for
AGCS, Munich Re & 7 others
$21.5mn over the loss of one jet, court filings show.
Celestial Aviation Trading 10, ILFC $671mn Global Aerospace, AGCS, Separately, Justice Henshaw in early July ruled to
Aircraft & others Fidelis & 4 others combine claims for 10 lessors, including AerCap,
Peregrine Aviation Foxtrot, Celestial $553mn Fidelis, Lancashire, Munich Carlyle, Avenue Capital and Merx Aviation, into a
Aviation Trading, AerCap & others Re & 20 others single hearing against several insurers, to be held in
Source: The Insurer February next year. The hearing – which will focus
specifically on so-called operator policies which
Following a string of hearings in early March, contain cut-through clauses – will determine matters
Justice Christopher Butcher found that five lessors’ of jurisdiction, but will not seek to determine matters
cases should be heard together in what AerCap’s of liability or quantum.

38 | Analysis: Aviation
AerCap deal creates settlement framework that shrinks $10bn+ disputed Russian lessor claims
then be subject to further negotiated for London MGA Hive, although Cox
settlement between insurers and the
lessor companies. Talking points was keen to downplay the group’s net
exposure.
An expert familiar with the structure • $645mn deal could be model for Lloyd’s CEO John Neal also welcomed
of the deal explained Aeroflot and its future settlements the deal, saying: “It’s good news for us
subsidiaries paid around two-thirds • Framework sees lessors reduce too, it means we can sit down and start
of the insured value of the aircraft loss to around 20-25% of insured to have the conversation about what is
and engines to AerCap. In addition, value the claim.”
AerCap retained its circa 10 percent • Settlement approved by US Lloyd’s is a leading aviation all-risks
maintenance reserves, which means Treasury and is “consistent” with and war (re)insurer and a number of
the “insured loss” fell to circa 25 sanctions syndicates have potential exposures.
percent of the assets in scope. • Commercial settlements between including Atrium, Beazley, Blenheim
He predicted that this would then (re)insurers and lessors would and Cathedral.
likely be the sum that would be subject reduce gross claims further = The Insurer has tracked more
to commercial negotiations between potential for $2bn loss (or less) than 95 legal actions filed in the UK,
lessors and insurers, the latter also • $10bn+ of disputed claims Ireland and the US – with 80 filed in
being ranged against each other as currently: most in London London alone – and claimants are
providing different scopes of potential typically reserving rights on both
cover. all-risk and war covers, although the
Following the settlement, AerCap said US Treasury. claims are complicated by issues of
it was reducing its claim to $2.75bn “Finding banks willing to process the coverage wordings, causation triggers,
from $3.5bn. settlement was very difficult but we got cancellation clauses and the impact of
AerCap is the world’s largest aviation there in the end,” the source explained. Western sanctions.
lessor and is widely regarded as a Speaking on the eve of the Rendez- London (re)insurance legal expert
pivotal force in deciding the overall Vous, Beazley CEO Adrian Cox Jonathan Sacher, a partner with
loss picture. It was the first lessor to file welcomed the settlement: “I think Bryan Cave Leighton Paisner, said: “I
claims against insurers and – at over it’s pleasing that settlements are personally believe that a settlement
$4bn in the aggregate – still the highest happening before this thing goes to between lessors and (re)insurers will
in total. AIG leads the larger all-risks trial. It is a very complex situation, be likely in many cases. This would
policy and Atrium leads the contingent but no one wants this stuff dragging be a preferable outcome for many
war placement. through years of litigation through lessors.”
Executives attending the Rendez- courts and the like. So I think it’s However, he warned there is always
Vous privately predicted further positive that settlements are beginning the risk that in cases of multiple
settlements will follow, noting that to happen and I hope more will follow.” litigation there is always the danger
there is commonality of interest on all Beazley is a significant aviation an “outlier” does go to litigation and
sides with Russian airlines keen to keep war underwriter through its support creates an unhelpful precedent.
hold of the seized aircraft and
lessors equally keen to dispose
Russia/Ukraine aviation claims worldwide to date
of assets which have been left
100
The Insurer Comment:
unmaintained for over a year.
Clearly good news. There is
They also said it was not in 90
still the intriguing battle, of
anyone’s interest to proceed 80
80
course, between all-risks cover
to trial with the litigation 70 and aviation war, where self-
Number of claims
considering the costs, litigation 60 interest is largely determining

uncertainties and also the fact a one’s view on liability (if
50
settlement framework has now at all). Does a commercial
40
been established. settlement between corporate
A source close to the 30 parties which reduces the loss
settlement also said that one of 20 suggest the cover is more all-
the unexpected difficulties was 10
risks than war? It is certainly
executing on the transaction 8 6 an argument that aviation war-
0
exposed (re)insurers are likely
once it had been signed off, US Ireland UK
Source: Solomonic to put forward…
even though this included the

The world
doesn't work
on a renewal
cycle.
And
neither
do we. We don’t only rendezvous in Monte Carlo.
Our conversations are year-round, tailoring renewal
solutions that are as unique as our clients. Because for
us, it’s not just a way to work – it’s the only way to work.
www.bmsgroup.com Specialty Insurance Reinsurance Capital Advisory

40 | Viewpoint: Facultative Reinsurance
Facultative
reinsurance takes
its seat at the table
Acrisure Re’s Ghassan Mansour examines the Fac reinsurers and brokers have continued to
rising prominence of facultative reinsurance innovate as a result and invest further in their
businesses, addressing some pre-conceptions of fac
R einsurance renewals have come under considerable

pressure and scrutiny this year. The prolonged
hard market terms and conditions across certain lines,
as nothing more than a transactional solution of
last resort. It has therefore become a strategic tool,
enabling the best possible outcomes in terms of
especially property D&F, continue to serve up challenges placement solutions and market positioning.
for (re)insurers, giving facultative reinsurance an even Fac has rightly earned an important seat at the
more important role to play in major placements. table and as treaty programs continue to relent to the
The global market is all too aware pressures of current market conditions,
of the factors contributing to this buyers are capitalising more on its
challenging environment, further dynamic nature, using it to fill gaps and
heightened by inflation and the Never has there been a better alleviate pressure points.
geopolitical dynamic. Very few indicators time for fac as part of the New capacity continues to make its
suggest that the benign market way into the fac marketplace, albeit at
conditions of the past, underpinned by
reinsurance spectrum a slower pace than in previous years,
consistent capital influx, will return creating new opportunities and giving
anytime soon. buyers a diverse choice.
US severe thunderstorms, European
floods and the Turkish earthquake generated more Sustainability of strategic fac
than $100bn in economic losses during the first half, The evolving use and growing recognition of fac in
and the recent Europe and Hawaii wildfires will both reinsurance single risk and portfolio solutions
add billions to this tally. Against this backdrop, fac has resulted in increased appetite from a wide
will continue to play a greater role within insurers’ spectrum of buyers, some of whom are considering
overall net and treaty reinsurance strategies. fac more strategically.
Whilst it has traditionally been considered a At Acrisure Re, we are witnessing a surge in the
peripheral afterthought, insurers have been buying demand for strategic fac solutions, cementing its
fac more strategically over the last 12 to 18 months, position as a sustainable option for buyers and,
not just on single risks, but alongside treaty solutions although fac faces similar market challenges to the
on a selected portfolio basis. The combination of wider sector in terms of appetite and capacity, it
the global fac market capacity, the flexibility that remains a go-to area for consideration. The Acrisure
fac brings and its complementary nature to treaty Re global fac team’s deep experience and expertise,
structures has increased demand and interest for fac and access to global market relationships, provides
solutions, allowing insurers to consider it as another the value and differentiation that buyers seek in this
lever in their toolkit. Never has there been a better challenging placement environment.
time for fac as part of the reinsurance spectrum. The integrated nature and holistic proposition of
Acrisure Re brings about a natural and close-knit
The entrepreneurial nature of fac collaboration between treaty, fac and capital advisory,
In recent months, insurers have increasingly removing barriers that often prevent the best possible
appreciated fac as an integral part to the overall outcomes for clients. As the tough market conditions
Ghassan
reinsurance strategy. Its adaptability allows Mansour is continue to persist through to 2024, fac will play a key
reinsurers to create tailor-made solutions, from managing role for buyers in solving some of their needs against
net retention solutions to structured treaty top-up director, head the backdrop of pricing and capacity volatility – and
of facultative
covers, all of which allow buyers to use its flexible international at Acrisure Re remains perfectly positioned to help
nature to their advantage. Acrisure Re clients navigate through these elements.

42 | Interview: Camilo Rodriguez
A time to shine
Camilo Rodriguez, head of international credit Ukraine war, what some originally thought could be
a short conflict has morphed into something longer-
and surety at Axis Capital, considers the latest
term.
developments and challenges in the credit and In a wider sense, we must also concern ourselves
surety reinsurance sector with the trajectory of economic recovery. We are
seeing encouraging signs concerning inflation,
What have been the biggest developments in 2023 but the pressure from increased interest rates can
within credit and surety reinsurance? affect financial performance within companies that
Two outstanding developments we are following could stress the credit and surety market. We also
closely are the efforts to control inflation by continue to see more insolvencies, but this has yet
central banks around the world and the effects of to fully translate into losses.
the ongoing Russia-Ukraine war – both of which
continue to profoundly affect geopolitics, wider What opportunities do you foresee for growth in
economic and fiscal policy, and credit and surety. this space?
With Covid, the impact can be classed not as what
happened but rather what didn’t. In the beginning, Credit and surety benefits from uncertainty, so it is
when cases were beginning to rise and stories of the important to see these somewhat ambiguous times
pandemic swept the media, we were preparing for a through the lens of opportunity.
doomsday scenario on par with the global financial In historical terms, previous generations have
crisis. However, mainly because of taught us that an economic crisis has
government intervention, losses did always been followed by an impact on
not fully materialise. As it relates to the credit. But we appear, so far at least, to
Russia-Ukraine war, the economic crisis From a credit and surety have skipped a cycle, which is a unique
management by various governments
has been strong, and the actions of
angle, we are seeing signs opportunity. Governments are getting
much better and quicker at economic
central banks are still combating the that the market is picking up crisis management, as displayed during
worst excesses of inflation. the Covid pandemic and the recent
From a credit and surety angle, we banking and inflation crises. Further,
are seeing signs that the market is credit insurers are becoming far better
picking up. This is largely due to major investment with risk selection as well.
in infrastructure from governments, which creates A more specific opportunity exists within the
activity for surety lines. From the credit side, credit space, particularly with European banks and
inflation translates into higher credit limits that the capital relief transactions. The strict regulations
different markets need to cover. assess how much capital banks can have at risk.
Many are looking for an opportunity to assume
What are the biggest challenges within this space? more risk, and we anticipate seeing more coming
to the table over the next few months. We are in an
Camilo
There are always challenges, and there is always Rodriguez, era in which credit and surety underwriters can
risk. That is what makes our sector so interesting. head of distinguish and elevate themselves – a time to shine
For example, a significant aspect of the ongoing international by making the right risk selections during a period
credit and
macroeconomic challenges we face is diagnosing surety at Axis of relentless uncertainty.
political tension correctly. Looking at the Russia- Capital

© 2023 EYGM Limited. All Rights Reserved. ED None.
How could AI prevent what we
can’t predict?
ey.com/insurance
44 | Viewpoint: Reinsurance Procurement
Reflecting a changing market

again. In reality, data is often cut much closer to
A modernised reinsurance industry requires a
renewal, compressing the timeline into a matter of
streamlined approach that isn’t hampered by weeks. The current lack of time, data accuracy and
manual processes. Howden Tiger’s George Harris simplicity creates a huge amount of deal friction.
Instead, REflect cleanses, validates and enriches
Hughes and Michelle To explain how the firm’s in-
client data to provide a simpler and more useful
house REflect solution is transforming how long- proposition – taking weeks instead of months and
tail reinsurance is procured in the casualty market giving back valuable time for analysis. The system
collates technical results into an easy-to-access,
A dvanced digital solutions can help brokers find

a competitive edge and allow cedants to identify
opportunities – and challenges – ahead of schedule.
consistent format, giving cedants a clear view of
their portfolio as it evolves and allowing them to
alter structures and understand impacts in real
The benefits are clear, with companies able to extract time. Cedants can interrogate their reinsurance on
tangible value through deeper engagement with their a granular level (justifying each unit of reinsurance
data. spend), aiding portfolio optimisation and driving
Many firms are still impeded by manual processes more informed purchasing decisions.
that are time- and resource-intensive. These archaic
processes can make buying reinsurance a woefully Innovation through agility
inefficient exercise. The motivations, data and Reinsurance is an area already targeted by insurtech
structures involved in long-tail reinsurance purchases start-ups. However, we have the scale, distribution
have become more and more sophisticated. We and agility to give this kind of solution the heft it
don’t believe the placement process has evolved to needs to make an impact. Unlike other reinsurance
keep pace; more time should be spent discussing brokers, we aren’t afraid of change and have invested
the qualitative elements of a portfolio and less time time and resources into allowing innovation to thrive.
establishing the quantitative, which is why we We are developing REflect with our proprietary
decided to innovate. market insights data platform NOVA. Since 2021,
NOVA has provided clients with access to unique
A game changer global market insight and strategic consultancy,
Frustrated with the status quo, we decided to create combining unique datasets from over 300 sources
REflect, our in-house reinsuretech platform that including placement data and wider market
provides greater speed, accuracy and insight during financials.
the placement process. REflect uses modern data Now we are building on this progress with
science to automate the quantitative processing REflect. Fundamentally, it’s about showing cedants
involved in a typical renewal, giving us back more where every unit of their reinsurance spend goes.
time to better meet our clients’ objectives. This This streamlined process means more time to
solution has been developed to address inefficiencies do real analysis, with clients benefiting from the
that specifically affect the casualty reinsurance transparency needed to take an objective view of how
market, and we expect to roll it out across other risk is priced.
classes in the future. The technology is also reflective of the shifting role
It’s worth looking at how long this all normally of brokers and growing focus on advisory services.
takes to get an idea of the impact of REflect. Ideally, The portfolio optimisation and market insight
our clients cut their data four to six months before elements of REflect will form a core pillar of our
a renewal, and then spend another month or so George Harris capabilities as we evolve into advocates.
working with us to refine it. We then run our analysis. Hughes is One of the most exciting parts of this is the potential
For a 1 January renewal, you might start in the managing to further innovate and enhance this system.
director at
summer and aim to be in the market by the autumn, Howden Tiger. What role will AI have, for instance? And how
a lead time of 12-16 weeks in all. There is a reliance Michelle To could migration to a fully cloud-based architecture
on manual (human) cleansing processes throughout, is head of supercharge client insights? This all awaits us, but
business
and it is not uncommon to unearth data issues at a intelligence at based on the REflect journey so far, we can’t wait to
late stage, which can mean starting the whole process Howden Tiger see what the future holds.

Your specialist
reinsurance partner
Delivering tailored solutions and
elevated service in a dynamic market.
Commitment to Specialty, Credit,

Accident & Health, and Casualty lines.
46 | Analysis: Casualty
Reinsurers look to
regain more ground
on casualty and
professional ceding
commissions
T he last year has seen a reversal in the direction of
ceding commissions for long-tail lines quota shares,
with the upcoming 1 January renewal likely to see Reversal of ceding commission
reinsurers push to accelerate the downward pressure on surge witnessed beginning in 2021
cedes. The dynamics that have begun pressuring ceding
According to a wide swath of executives, quota commissions are now well-established.
share treaties with significant public D&O exposures Hard market conditions on underlying business
could see the past two years’ gains on ceding began in 2019, initially driven by the shortening of
commissions – in some cases as high as 4 points, and limits by industry giants AIG and Lloyd’s, and later
sometimes spanning multiple renewals – reversed accelerated by the pandemic loss cost uncertainty
entirely. that followed. These conditions strengthened
Both broking and underwriting executives were projections of portfolio profitability.
more sanguine about potential price changes for The improved economics on underlying portfolios
casualty and other professional liability business, led to an unusual shift in reinsurer appetites, leading
where the downward movement in cedes is expected casualty and professional liability quota share deals
to be more muted due to a more stable renewal to become attractive diversifying classes as reinsurers
environment. have been handed consecutive loss-making years on
Market sources have given preliminary indications property cat deals.
that ceding commissions on deals with heavy public The heavy demand among reinsurers for long-tail
D&O exposures are falling 2-4 points, marking a major lines proportional deals led ceding commissions to
reversal on their upward climb just 18 months ago. surge at 1 January 2022 and 1 June 2022 renewals,
On the other hand, casualty and E&O deals are said with cedes in many cases going up by 2 points, or as
to have been more resistant to downward pressure, high as 4 points in some instances.
with the persistence of underlying rate gains making Ceding commissions in the mid-30s became viewed
it more tenable for those deals’ economics to remain as the “new benchmark” for reasonably well-
intact. performing portfolios, as brokers and reinsurers
found agreement that persistent underlying rate
gains had created significant new margin on many
Talking points deals.

At the same time, the market witnessed aggressive
• $645mn deal could be model for future settlements buyer and broker behaviour with cedants slashing
• Framework sees lessors reduce loss to around 20-25% of insured cession rates substantially, in a move to retain more
value of the increasingly profitable underlying business net.
• Settlement approved by US Treasury and is “consistent” with In some cases, reinsurers wrote deals with ceding
sanctions commissions as high as 38 percent, a point at which
• Commercial settlements between (re)insurers and lessors would others walked away. These moves have been viewed
reduce gross claims further = potential for $2bn loss (or less) by some as cynical bids to get a foothold on deals,
• $10bn+ of disputed claims currently: most in London and as a way to extract greater leverage when
commissions would inevitably fall.

Analysis: Casualty | 47
Long-tail lines adverse PPD, cat hard business renewed between down 3 points and flat.
market gives reinsurers more leverage In contrast, commissions for US general liability
In the past year, as prior accident years have begun to quota shares renewed on average down 1 point to
develop adversely and underlying rate increases have flat.
slowed to the extent that they have failed to meet As reinsurers aim to impose broad, market-wide
cedant projections at earlier renewals, reinsurers downward pressure on commissions, the common
that gained leverage on panels by writing deals with refrain among brokers that each deal is unique is
higher cedes have put themselves in the driver’s seat. likely to get louder for casualty and professional
At last year’s liability deals,
renewal the specifically at 1.1.
challenging Casualty rate movements - mid-year 2023 Industry
market for executives largely
cedants to fill out Territory Pro rata XoL – no loss XoL – with loss expect that the
commission emergence % emergence %
loss-impacted change change most aggressive
property cat buyers in recent
programs allowed China n/a +7.5% to +20% n/a years – those
reinsurers International – Liability and Professional Lines 0% +3% to +5% +5% to +12.5% that pushed
that tolerated most heavily on
high long-tail United States – Healthcare Liability -2.5% to 0% -2.5% to 0% +2.5% to 10% commissions
lines ceding United States – General Third Party Liability -1% to 0% 0% to +5% +5% to +15% and also those
commissions to that drastically
extract increasing United States – Professional Liability -3.0% to 0% 0% to +10% +5% to +15% cut cessions –
concessions on United States – Workers’ Compensation n/a +12.7% +12.7% could potentially
casualty and face the most
professional Note: Movements are risk-adjusted downward
liability Source: Gallagher Re pressure on
deals, putting cedes.
downward That said, market
pressure on cedes. US composite insurance pricing change — by major coverage line appetite amongst
In a noteworthy US Casualty 8% 8%
9% reinsurers for
7% 7%
example of the 5% 6%
4% 4%
6%
3%
3% long-tail lines deals
2% 2% 2%
market trajectory, 1% 1% remain strong, and
The Insurer the oft-held market
reported last dynamic where
US Financial and Professional Lines
December that 34%
commissions tend
30%
Zurich North 23%
28% 28%
25% 25%
27% 28% to go up faster than
21%
America had they come down
15%
trimmed the is likely to remain
ceding commission 11% true.
7%
on its D&O treaty Perhaps the
by 2 points while biggest question
-6% -10% -9% -10%
keeping the mark that loomed
commission on at the last 1
its casualty quota January renewal
share essentially Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23
– whether cedants
flat – pointing Source: Marsh Specialty and Global Placement will increase
to the diverging cessions into
outcomes in the two lines of business. the market – once again hangs over the upcoming
Additionally, Markel lifted the annual aggregate renewal, likely to an even greater degree.
deductible on its 1 December financial lines treaty The question in the minds of both brokers and
by 4 points to 35 percent from 31 percent, effectively underwriters will be the extent to which cessions
lowering the ceding commission on the deal. will grow and panels will expand to forestall a
Gallagher Re’s mid-year renewal report this year greater drop in cede, and to bring in more capacity
highlighted the divergence in downward pressure on for difficult-to-place deals – such as property cat – by
casualty versus professional liability treaties, where it satisfying markets with more attractive casualty
showed ceding commissions for professional liability deals.

48 | Interview: Nick Nudo
Scor’s Nudo: Reinsurers

not being compensated for
heightened US liability risk
mid-30 percent range, which need to reduce to
A deteriorating US tort environment, loss trend
accommodate a more equitable partnership between
inflation, prior year development and flattening reinsurers and clients.”
or reducing primary rates are all taking their toll Nudo also forecasted that even portfolios with
on the US casualty market ceding commissions in the low 30s “are going to be
challenged to come down”.
N ick Nudo, chief underwriting officer for Scor US

P&C treaty, does not believe reinsurers are being
adequately compensated to assume the heightened
“When you consider the current US tort and
business environment, the pressure to reduce
casualty commissions is there to create better
risk. alignment of economic interests,” Nudo said.
His company views the US casualty reinsurance
market as having “several major issues that are not Forecasted primary rates under scrutiny
being recognised in current reinsurance terms”. Closer scrutiny on the primary rates forecasted
“It feels like the established reinsurers are on business covered within casualty quota share
maintaining their casualty portfolios just for the treaties is also needed, Nudo suggested.
main benefit of getting access to their “In general, we’re seeing more
clients’ other lines, specifically property forecasted primary rate misses than we
cat,” Nudo noted. are rate hits, meaning most cedants are
The most challenged segments within When you consider the not achieving their budgeted rates for
US liability are financial lines, in current US tort and business 2023,” Nudo stated.
particular public D&O and auto liability, environment, the pressure to However, clients are being disciplined
Nudo said. in how they deploy limits, said Nudo.
“In addition, the large Fortune 1000 reduce casualty commissions “There is thoughtful deployment
business that is uniquely affected by is there to create better of capacity and attachments and
class actions and the nuclear verdicts alignment of economic ventilation. Further, there is recognition
that we’re now seeing all the time, has by standard markets [that they need] to
made this space too volatile,” Nudo interests relinquish their appetite for challenged
noted. Scor’s Nick Nudo on the need to classes like habitational, and let E&S
reduce ceding commissions carriers handle those exposures.”
Ceding commission pressure
Other business segments within US Standalone cyber stance
liability “present the potential for With ransomware losses ticking up,
profit”, Nudo said, although much of the sector is once again reckoning with
this is dependent on ceding commissions continuing the challenges of underwriting such a fast-evolving
to reduce, and primary rates not falling behind loss sector as cyber.
trend. Scor is adamant the peril needs to be written on a
“Depending on the line or class of business, standalone basis, and not within broader casualty or
primary rate increases need to be close to or above liability treaties, Nudo stated.
double digit,” Nudo suggested. “Cyber is a unique market, and it is a unique
“The need to reduce ceding commissions is also line of business. It needs to be modelled and PML
there, and we think that this pressure is only going allocated to it, so it is best not to combine it with
to increase in the short to medium term,” he stated. a D&O portfolio, or an excess/umbrella portfolio.
Both D&O and excess casualty/umbrella quota Those are different lines that need to be analysed
shares “are due for some pretty large reductions in and monitored separately.
ceding commissions”, Nudo said. “Cyber exposures require complex analysis, and
“Most public D&O portfolios, or D&O-dominated terms that are unique to that portfolio and market,”
portfolios, still have ceding commissions in the Nudo stated.

transre.com
50 | Viewpoint: Casualty
Rising verdict severity ripples

through casualty lines
As liability/casualty writers adjust to ever-increasing verdicts, TransRe’s
Rich Henderson analyses the causes and consequences of such decisions
T he frequency of large verdicts has increased

significantly in recent years across all product lines.
As liability/casualty underwriters adjust to “aberrational”,
(by far) the previous record for $25mn+ verdicts. Put
another way, 2022 saw an average of one $10mn+
medical malpractice verdict every week and (of those)
“nuclear” and even “thermonuclear” outcomes, the era of a $25mn+ verdict every two weeks. 2023 is already
$100mn+ verdicts is upon us. shaping up to equal or exceed these records.
Because only a small percentage of claims are Another way to view the data is by taking the 10th,
actually tried to conclusion, the overall financial 25th and 50th largest verdicts in each year. This
impact of verdicts may seem small. However, trial view takes us past the headline verdicts and into
outcomes also impact claim/legal strategies and send the ‘working layer’ decisions that may not reach the
strong societal signals to which the insurance industry media, but which affect industry practitioners.
must be alert, even if the awakening is a rude one. The data is consistent. Pre-Covid we see a steady
This discussion focuses on medical malpractice increase in the number of substantial verdicts,
verdicts but much of the commentary is equally particularly the 25th and 50th largest verdicts. This
applicable to other areas of the casualty world. shows it is not just a handful of mega-verdicts that
are skewing the overall outcome. As the courts
Analysing the verdict data reopened for trials in 2022, the results in all three
Over the past 20-plus years TransRe has built and bands reached or exceeded the prior records. Those
maintained a substantial proprietary database who believed in (or rather hoped for) a “halo effect”
comprising thousands of medical malpractice because of the efforts of medical professionals during
verdicts, compiled from various sources and regularly Covid have been disappointed. Note the data for
cited and used (with our permission) by claims, 2023 is on a year-to-date basis, with another four full
underwriting, actuarial and legal professionals. months of trials to inflate current levels.
For the purposes of this discussion, we look first at
the rising frequency of $10mn+ and $25mn+ verdicts Social inflation and other explanations
between 2012 and today (as of 31 July 2023). Social inflation is not a new term but is regularly
It is clear the number of $10mn+ and $25mn+ cited as a major factor driving up the frequency of
verdicts is increasing. Each of the three years prior large verdicts, in medical malpractice as well as other
to the Covid-related interruption of trials set a new product lines. On the flip side, there are others who
record for such verdicts. As trials resumed in 2022, argue that social inflation either does not exist or is, at
juries picked up where they left off by equalling the best, an over-referenced excuse for other factors.
prior record for $10mn+ verdicts, and surpassing
10th/25th/50th largest verdicts

$10mn+ verdicts 2012-2023 2012-23 $mn
60 $50
$40
45
10th
$30
30
$20
$25mn+ 25th
15
$10
$10mn+
50th
0 $0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
YTD YTD
Source: TransRe Source: TransRe

Viewpoint: Casualty | 51
We do not attempt to determine whether social of both $10mn+ and $25mn+ verdicts. In 2018/19/22
inflation exists. However, it is clear that many of the there were 150 verdicts of at least $10mn, compared
variables cited in respect of social inflation are also to 98 such verdicts in 2015-17, and 91 in 2012-14. Of
variables which might lead juries to return large those 150 verdicts, 53 exceeded the $25mn threshold,
verdicts. Such variables include evolving views of compared to 28 in 2015-17, and 26 in 2012-14.
social responsibility and the righting of perceived Social inflation is one proposed explanation for the
wrongs, as well as desensitisation to the value of rise in the size of jury verdicts. Other explanations
money (the salaries of athletes and entertainers, focus on the plaintiffs’ bar and its ability to tap
$1bn lottery awards etc.). Significant media coverage into factors that anger juries, the increased use of
and advertising around large verdicts plays a so-called “Reptile” strategies, and more effective
part, as does the lowered trust in corporations in anchoring techniques. Conversely, the defence has
general. Hospitals and medical professionals are been more reluctant to put forth defence anchors and
not immune to this phenomenon. Highly polarised cohesive damages arguments. It may be a common
debates concerning mask mandates and vaccinations defence refrain that mentioning “damages” is a
are examples of Covid-related tensions and stress display of weakness that will “set a floor”, but there is
that can impact the public perception of medical growing evidence that proper defence anchoring and
professionals, including in the courtroom. If there well-constructed damages defences help mitigate the
was a “halo effect”, it has quickly dissipated in the downside verdict potential.
eyes of jurors. To conclude this analysis, the causes of verdict
To seek evidence for or against the social inflation inflation may be debated, but the effect is clear.
narrative, we sorted the data into blocks of three Although final settlements rarely approach the
years: 2012-2014, 2015-2017 and 2018, 2019 and verdict amount, rising verdicts lead to higher
2022 (we excluded 2020 and 2021 given the massive settlements in those cases that go to trial. As those
disruption to trial calendars). We then looked at verdict amounts rise, so too do the settlement
the percentage of verdicts of at least $10mn which demands in future claims, which can both increase
also exceeded $25mn. Within the world of medical the size of such settlements and also prolong
malpractice insurance practitioners, it is commonly litigation, adding to the legal expenses.
assumed that defendants continue to successfully
defend ~80 percent of claims that go to verdict. That Possible solutions
may still be true, but we wanted to look more closely We may disagree on the significance of medical
at the verdicts in favour of the plaintiffs. Are the malpractice jury verdicts, but they cannot be ignored.
amounts involved rising? The increasing frequency of ever-larger verdicts
The answer is a resounding “yes”. For 2012-2014 ripples through all casualty lines. Will the current
and 2015-2017 29 percent of $10mn+ verdicts also trend of rising verdict severity slow down? The legal
exceeded $25mn. In 2018/19/22 35 percent of $10mn+ standard of care has not changed, but the factors
verdicts also exceeded $25mn. As courts reopened, which influence juries continue to evolve and today’s
that figure increased to a record 44 percent in 2022 world is not the same as pre-Covid. The defence bar
alone, and so far this year the results are even more and those managing medical professional claims
ominous, with more than half (53.5 percent) of should take every opportunity to better understand
verdicts of at least $10mn now reaching or exceeding why juries are responding the way they are, and we
$25mn. Thus, while the frequency of defence verdicts should adjust our approach based on these insights.
has remained generally consistent, the severity of The plaintiffs’ bar has done an excellent job of
adverse verdicts has significantly increased. effectively communicating successful outcomes and
This trend has a ripple effect throughout the Rich the approaches used. Which tactics worked? Which
(re)insurance of medical malpractice, creating Henderson did not? Can we quantify the impact of each tactic?
leads
challenges for underwriters, actuaries and claim/ TransRe’s For many years TransRe has shared our experience
legal professionals. Should we settle or defend? How medical with the defence bar and medical malpractice
are demands to settle within limits/“hammer” letters malpractice professionals. We work closely with our business
claims group
to be addressed? When is national counsel necessary, and can be partners, using our database to offer insights on
and how should they be woven into the defence? contacted claims. We host industry webinars and podcasts and
What’s the right attachment point? How much to discuss publish articles and analysis. We actively participate
any aspect
coverage should we offer, and at what price? It also of this paper, in American Legal Connections, a platform that
affects clients as they decide how much coverage to including brings medical malpractice professionals together
buy and fear the exposure if they don’t buy enough. the work of to share knowledge and best practices. We welcome
American
In addition to the increased severity of verdicts, we Legal every opportunity to discuss these issues in more
have also seen a significant increase in the frequency Connections depth.

52 | Viewpoint: Generative AI
The GenAI revolution in insurance

– how carriers can deploy widely
based on strong governance
EY’s Anita Sun-Young Bong, Ed Majkowski channels. AI-generated recommendations for next-
best actions will enable call centre reps to have more
and Phil Vermeulen examine the impact of
empathetic customer conversations, rather than
GenAI on the (re)insurance sector simply collecting information. Such “human-in-the-
loop” processes are among the most compelling use
F ew, if any, technologies have achieved mass

adoption in a shorter period of time than ChatGPT,
thanks to its massive accessibility and highly intuitive
cases.
Optimising adoption and ROI via effective

interface. Not only has ChatGPT harnessed the governance
extraordinary power of generative AI (GenAI), but it’s To boost returns on their investments in and
also incredibly easy to use. That’s why GenAI will be promote responsible use of GenAI, insurers will need
adopted widely across the business, and why strong to deploy widely across the business and develop
governance models are necessary to guide adoption as robust governance frameworks.
the technology is democratised. Embedding GenAI more deeply within products,
Insurers are already using GenAI to automate processes and applications requires adding new
processes and integrate diverse datasets, analyse data (including content and images) and integrating
customer behaviour and tailor marketing existing data sources into the AI models that produce
communications. In actuarial and underwriting, quality outcomes. Insurers must design and manage
GenAI streamlines the ingestion of large datasets, those models carefully, ensuring that outputs are
freeing underwriters to focus on high-value accurate and that customers’ confidential data is
analytical and risk assessment work. In IT, cyber protected at all times. Monitoring third-party data
teams use GenAI to analyse operations data for feeds can help minimise the risk of data breaches
attempted fraud, monitor network security and and the introduction of “bad data”.
document attacks for regulatory reporting. Insurers will also need new talent (e.g.,
More sophisticated deployments are not far prompt engineers). AI “factories” or technical
away; smarter “co-pilot bots” will make knowledge centres of excellence (CoE) can centralise scarce
workers in underwriting, actuarial and claims even skills and promote organisational policies and
more productive. GenAI will streamline decisioning ethical standards. CoEs can also provide change
in life insurance underwriting, replacing today’s management support by communicating the “why”
lengthy application processes. It will automate behind adoption and the “how” of implementation.
Anita Sun-
many compliance and risk management activities. Young Bong is Robust governance frameworks are essential for
Translation and regeneration of code across EY Asia-Pacific responsible usage of GenAI – that is, in alignment
languages is potentially transformative for carriers insurance with ethical business objectives, company values
sector leader;
with COBOL-based applications. Ed Majkowski and compliance with regulatory requirements.
The biggest impacts will come in customer-facing is EY Americas Given the interconnected nature of GenAI
operations. More precise analysis of market trends insurance applications, the complex ecosystems in which they
sector and
and customer sentiment will enable insurers to consulting will be deployed, and the need to scale, insurers
personalise and, ultimately, individualise customer leader; Phil will need ever more sophisticated controls. Such
experiences. Virtual sales and service agents will Vermeulen a controlled approach to adoption won’t be easy,
is EY EMEIA
soon be able to resolve complex issues and provide insurance but it’s the right way to democratise high-impact
tailored advice and even a personal touch in digital leader technologies, such as GenAI.

The Most
Widely Used
Reinsurance
Placing Platform
Back in the Office or Working Remotely

The eReinsure platform brings together many of the market’s
largest carriers, brokers and reinsurers. It supports the work of
reinsurance professionals worldwide, completing thousands of
deals each month. These customers benefit from continuous
improvements in technology including secure data transfer
and automation – increasing efficiency and reducing the cost
of moving risk to capital. [email protected]
54 | Viewpoint: Generative AI
GenAI and the Intelligent

Risk Platform – Accelerating
insights for risk decision-makers
Moody’s RMS’ Moe Khosravy on the role of Platform to do just that. We showed how to get
answers within seconds to questions such as “What
generative AI in enhancing risk insights is my exposure to an event similar to Hurricane
Ida in terms of total insured value?” or “How many
F or the past few years, Moody’s RMS has been hard at

work delivering the state-of-the-art Intelligent Risk
Platform and integrated suite of applications. It’s been
properties in total would be impacted, in which
state?” and more.
We did this not by simply calling public
an incredible journey and despite all the success, we are application programming interfaces to get untrusted,
relentless in innovating ways to boost productivity for hallucinated data or exposing sensitive data, but
users. by using several state-of-the-art GenAI patterns to
Generative AI, or GenAI for short, condition the interaction between the
comes at an opportune time. Leveraged user and a secure interchange of data
appropriately by machine learning securely locked in our solution. It has
experts who know the craft, GenAI can Leveraged appropriately by been incredible to hear the feedback
transform business productivity and machine learning experts from clients as we iterate on this.
reduce time to insights. who know the craft, GenAI In another early proof of concept
As a consumer, once you’ve used featuring GenAI, we are exploring
ChatGPT or other large language can transform business reducing the time it takes to go from
models, it’s hard not to judge today’s productivity data to insights to actions through a
search experience as archaic and time- bot that generates answers to the plain
consuming. It seems crazy that I’m language question and produces all
expected to specify keywords only to the reports, charts and visualisations
drown in a sea of links that may not even have the directly from the data on the platform.
answer to my question! The results have been very encouraging! Imagine
I believe search is already in a state of evolution an event approaching and being able to say things
where keywords and adverts will be replaced like “Write a formal tone email in 500 words
by new rank and relevance algorithms that can summarising our top 10 loss drivers. Include a chart
dynamically select content providers capable and of …” without ever leaving the platform.
willing to help answer a user’s question given I encourage you to watch our demonstrations and
the context of the session, resulting in a curated, as with all our early innovations, we’d love your
‘answers’ marketplace. Consumers’ demand for feedback to evolve it. Please email [email protected]
productivity is already forcing this transition. So as if you’d like to find out how you can engage and expect
risk professionals, should we not demand leap-frog Moe Khosravy a lot more innovation in this space from us.
productivity gains from today’s solutions? is executive We’ll soon be launching a new Risk Labs page
As I recently demonstrated at our Exceedance vice president to showcase early innovations while continuing
of engineering
conference in New York, we’ve been thinking about at Moody’s to deliver on the exciting roadmap of models and
how to best bring GenAI into the Intelligent Risk RMS software.

We
choose
alignment
over leverage
Rising rates, shrinking
capacity, bigger retentions.
It’s a perfect reinsurance
storm for insurers, and
there’s no one solution.
That’s why before we come up

with one, we hear your vision.
Then we work with you cross-
class, across the globe, to move
you towards your goals.
Find out more at qbere.com

CASS/ALIGN/2308
QBE Re is a trading name of QBE Europe SA/NV (No. 0690.537.456) and QBE Underwriting Limited (No. 1035198) ('QUL').
QBE Europe SA/NV is authorised by the National Bank of Belgium under licence number 3093. Registered office at
Marsveldplein 5 Place du Champ de Mars, 1050 Brussels, Belgium. QUL is registered in England and Wales with its
registered office at 30 Fenchurch Street, London EC3M 3BD. QUL is authorised by the Prudential Regulation Authority
and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
56 | Analysis: Covid BI
UK BI litigation enters final act with

Stonegate and ExCeL appeals to dominate
I t is now almost three years since the Supreme Court
handed down its largely policyholder-friendly judgment
in the Financial Conduct Authority (FCA) test case, but
Talking Points
for many insurers, their reinsurers and policyholders, • Issues of aggregation, denial of access and government support
uncertainty remains over Covid-19 business interruption set to be tested
(BI) exposures. • Q4 2023 to hear appeal hearings in Stonegate, Various Eateries
The UK watchdog ran a test case in July 2020 with
and ExCeL
a group of eight sample insurers – Arch, Argenta,
• Lawyers warn that continued uncertainty is impacting reserve
Ecclesiastical, Hiscox, MS Amlin, QBE, RSA and Zurich
– in a bid to resolve the most common pandemic-
releases
related BI claims disputes between policyholders
(typically SMEs) and insurers. part of a coordinated group action. Zurich reached a
The Supreme Court later upheld the findings of the confidential settlement with Greggs earlier this year.
High Court, ruling largely in favour of policyholders While insurers welcomed the rulings, the High
in January 2021. And while the test case was Court found in favour of both insurers and their
successful in clarifying various issues common to claimant policyholders in various aspects of all
many Covid-19 BI claims, there remain a number of three cases and Justice Butcher handed the parties
areas of uncertainty created by the variety of policy permission to appeal earlier this year.
wordings used and the lack of legal clarity around “The court will hear a full range of arguments on
their application. This is demonstrated by the queue these key issues and it is not at all unlikely that there
of high-profile disputes still under scrutiny by the will be a level of analysis and commentary that will
courts. provide an opportunity to open up old debate and
Legal sources have highlighted a plethora of previous analysis,” Hardy explained.
unresolved issues – namely non-damage denial of
access (NDDA) extensions, issues of aggregation, ExCeL and Kaizen appeals to test
causation, furlough and policy triggers – noting that “at the premises” wordings
a series of “very significant” and high-value claims The UK is also set to play host to the appeal of the
(and appeals) are scheduled to be heard in the fourth 16 June finding in a test case analysing so-called “at
quarter of 2023, with others waiting in the wings. the premises” (ATP) wordings. The test case included
the £16mn claim brought by London International
Q4 2023 appeals Exhibition Centre Plc – the owner of London’s ExCeL
The Insurer is aware of more than 26 live BI cases centre – against the UK arms of Allianz, Aviva, Chubb,
currently making their way through the UK court CNA, RSA and Zurich.
system, but Peter Hardy, partner at Reed Smith, Policyholders for the remaining cases included
says it is the developments in the claims brought by Hairlab, Muscleworks and Bodylines, Mayfair, Kaizen,
hospitality groups Stonegate and Various Eateries – Why Not Bar and Lounge and PizzaExpress. Insurers
earmarked for appeal towards the end of 2023 – that named in these cases included Axa, Ageas, HDI Global,
the (re)insurance sector should be most fixated upon. Zenith Insurance, QBE Europe, Liberty Mutual and XL
Hardy noted that the “key issues” of aggregation, Insurance.
additional increased costs of working and the correct In his pro-policyholder judgment, Justice Jacobs
treatment of government financial support will be found the Supreme Court’s 2021 ruling on disease
examined by the Court of Appeal. clauses also applied to ATP cover, and that claims
The multi-million pound suit brought by Stonegate should be paid out under such clauses based on
against MS Amlin, Zurich and Liberty Mutual, and government guidance rather than having to prove
Various Eateries’ dispute against Allianz were heard there had been a localised outbreak.
last summer and concerned a Marsh Resilience The insurers on ExCeL have been given permission
wording – a policy which came under scrutiny during to appeal the ruling, with only RSA declining to
the FCA test case. pursue the appeal. The defendant insurers on the
The actions were heard alongside the £150mn remaining claims have until 11 September to file their
claim brought by baker Greggs against Zurich as notices of appeal.

Analysis: Covid BI | 57
“As the appeals are concerning the issue of the wording is sufficiently distinguishable from
causation and policy construction, this remains one others in the market.
of the most landmark cases since the FCA test case,” “The NDDA cases are significant because they affect
said Iryna O’Reilly, head of BI at Barings Law, the many policyholders, and the cases are likely to go to
claimant law firm representing a number of test case the Court of Appeal to provide the market with the
participants including Kaizen. certainty of a higher court guidance in relation to
Although these cases are going to determine some the Corbin & King issues,” explained Joanna Grant,
of the most complex legal issues surrounding the BI partner at Fenchurch Law.
cases, O’Reilly noted that not all policy wordings will Finally, there are a number of cases where
be captured. wording-specific issues will be resolved. These
“It is therefore inevitable that further litigation include the Burger & Lobster case, concerning
is likely to arise from other policy wordings in an matters including the meaning of “policing authority”
attempt to obtain clarity from the courts on their in the context of Covid-19 lockdowns; and the Oaxaca
policy constructions,” O’Reilly added. and Flat Iron cases brought against QIC, which will
consider whether the words “immediate vicinity”
Corbin & King ruling to be impact on the type of coverage provided by insurers
placed under the microscope in NDDA wordings.
The lower court ruling in Corbin & King v Axa is to
be tested in an October 2023 test case concerning Reserving challenges
eight separate claims brought against Liberty Mutual, Jonathan Sacher, partner and co-head of the
its subsidiaries and a number of other insurers insurance practice at Bryan Cave Leighton Paisner,
including Allianz. noted that the Q4 hearings could have a “significant
The test case will be led by Gatwick Investment impact” on the amount paid to policyholders under
Ltd and will include the Hollywood Bowl Group, BI clauses depending on how the Court of Appeal
PizzaExpress, Fuller Smith & Turner, Starboard rules.
Hotels and International Entertainment Holdings. “Further, depending on the terms of the settlements
It comes after the High Court ruled that Corbin & already entered into between insurers and
King, the owner of upmarket London restaurants The policyholders, it might also mean that policyholders
Wolseley and The Delaunay, was entitled to a payout try to re-open claims that insurers had closed in
for losses incurred at each of its premises following order to try and claim further sums,” he explained.
government-mandated closures in March, September There is already some delay in releasing reserves,
and November 2020. which is of concern to some insurers, Sacher said
The judgment was significant as it provided – but more so to reinsurers, particularly in the ILS
clarity on the proper application of NDDA wordings world.
and policy limits in cases where there are multiple “There are some mainstream UK insurers who
insureds and numerous premises affected by are maintaining significant reserves pending the
lockdown regulations. outcome of Stonegate and other cases, which has
But some insurers consider that they are not bound meant that they are unable to properly account to
by ruling, arguing Corbin & King will not be binding reinsurers who are keen to make an assessment of
until there is guidance from a higher court, or that their exposure now, some three years on.”
UK business interruption disputes poised for appeal in 2023

Date Claimant Insurer Notes
Autumn 2023 Stonegate MS Amlin The UK’s largest pub group is seeking £1.08bn from the insurers. Tipped by legal
Liberty Mutual sources as being a bellwether for future claims.
Zurich
Key issues: Aggregation of loss; Causation of post policy period losses; The treatment
of increased operating costs; The impact of government support
Autumn 2023 Various Allianz The owner of UK restaurants Coppa Club and Tavolino is seeking up to £16.4mn.
Eateries Plc
Key issues: Aggregation of loss; Covid-19 as a single ‘event’, or multiple
Autumn 2023 Kaizen Cuisine HDI Global SE A group of UK restaurant owners filed a legal claim against the UK arm of HDI Global. All
HDI Global SE - UK three restaurants say their insurance coverage protects against BI losses of £500,000.
Key issues: Dispute over two in-force policies

58 | The Insurer Forum: Jonathan Sacher
Reinsurance
uncertainty as UK
Covid BI disputes
continue: BCLP’s Sacher
B ryan Cave Leighton Paisner (BCLP)’s Jonathan
Sacher says reinsurers continue to face uncertainty
over their ultimate exposure to Covid-19-related
good place to settle disputes. While these have been
dominated on the primary side, these cases track
to the reinsurance market,” Sacher said, adding:
business interruption (BI) losses, adding that the sector’s “Uncertainty will prevail and what this means for
preference for arbitration has prevented important legal reinsurers is further uncertainty.”
precedent from being passed down to the market. The growing number of (re)insurance disputes
Speaking at The Insurer’s Pre-Monte Carlo Forum, emanating from Russia’s invasion of Ukraine is also
Sacher, a partner and co-head of the insurance driving uncertainty for reinsurers, Sacher said,
practice at BCLP, noted that a steady stream of pointing to the claims lodged by aviation lessors
pandemic BI claims continues to enter the UK courts against insurers over trapped assets.
almost three years after the Supreme Court handed The Insurer has tracked 80 disputes filed in London’s
down its largely policyholder-friendly judgment in the High Court with a collective value of $8.12bn against
Financial Conduct Authority test case. more than 30 separate insurers, reinsurers and MGAs
Using data from Solomonic, Sacher noted that as of 5 September. This is up from the 55 disputes
more than 20 fresh claims – mainly from UK SME with a collective value of $7.7bn documented in a
hospitality businesses – have been filed in the year to previous analysis by this publication carried out in
date, which he said served to highlight the “significant July.
uncertainty” that remains over the market’s exposure Using data from Solomonic, Sacher confirmed this
to BI losses. publication’s analysis, adding that a further eight
“The outcome of those cases continue to track claims have been filed in the US courts and six in
into the reinsurance world,” he said. “And while Ireland.
there is growing clarity on the primary side, there Sacher noted that the cases filed by aviation lessors
is considerable uncertainty in the interpretation in London all similarly argue that aircraft leased into
of wordings on the reinsurance side and a lack of Russia are covered by policies against war or theft,
precedent is compounding this.” but insurers point out the planes are undamaged and
Sacher noted that in a reinsurance claims context, might yet be returned.
most disputes are He noted that the
resolved by arbitration claims are “complex”
or commercial Covid-19 related English claims but suggested that it is
settlements and as a
result there is “very
filed: Multiple Parties in each “unlikely” that many will
reach the courts.
60
little” precedent to “I personally believe
determine outcomes and 50 that a settlement between
guide disputes. 50 lessors and (re)insurers
“That’s either because 40 will be likely in many
there is a lack of disputes 38 37 cases. This would be a
30
or a preference for preferable outcome for
arbitration,” he said. 20 many reasons,” he said,
21
“It’s a combination adding that the situation
of both but I’d say 10 14 is not an “either/or” with
predominantly the latter. settlements made possible
0
“Covid-19 gave us a 2020 2021 2022 2023 YTD 2023* by court rulings in a
good insight as to why *2023 extrapolated number of the most high-
the courts remain a Source: Solomonic profile cases.

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60 | Analysis: PFAS
PFAS: Causal link to personal injury

could open litigation floodgates
The Insurer explores the industry’s approach towards managing exposure to PFAS liabilities
A s carriers look to manage potential liabilities

associated with per- and polyfluoroalkyl substances
(PFAS), brokers and buyers alike are drawing comfort
Agency (EPA) has developed methods for testing
known chemicals in groundwater and drinking
water, the national testing strategy is often updated
from the fact that reinsurers are not yet introducing with new methods and sample sites.
broad exclusions for the chemicals. In addition to uncertainty over the number of
Speaking to The Insurer, Casey Petersen, head of US chemical compounds classified as PFAS, the absence
casualty at McGill and Partners, explained that PFAS of a ‘signatory’ disease linked to exposure challenges
exposures are more likely to be underwritten on an the often-touted suggestion that PFAS could be the
individual account basis rather than being slapped next asbestos for the insurance industry.
with broad-brush exclusions. Tom Lee, a partner at law firm Bryan Cave
“In most cases, (re)insurers are not excluding Leighton Paisner who serves as a member of the
coverage across the board,” he said. “They are energy, environment and infrastructure practice
looking to underwrite each account individually, group and founder of its PFAS team, noted that
which is what buyers and brokers prefer.” although this is a popular comparison owing to the
For example, a carpet manufacturer using a water- wide-ranging industrial footprint of both exposures,
or stain-repellent coating known to contain PFAS there is currently no causal link between PFAS
will likely have an exclusion in their policy going exposure and a disease.
forward, whereas original manufacturers of the “Whereas with asbestos they were able to
compounds will struggle to find coverage at all. develop a clear causal link between exposure and
Petersen affirmed: “We need insurance for PFAS to mesothelioma, we don’t have that same causal link
cover for the unknowns. The insurance industry has for PFAS yet. That’s something that I anticipate will
a lot of surplus right now, so we should be able to be extensively litigated and it’s going to be tested in
get coverage on a recurring basis as long as capacity the bellwether trials,” said Lee.
remains and carriers are willing to write new With the EPA website prefixing any suggestion
business.” of reproductive impact, endocrine disruption and
Adam Grossman, vice president of emerging risk increased risk of cancers with “may”, this lack of
and modelling and senior scientist at Praedicat, causation leads Petersen to reject the comparison to
noted that in terms of insurability, this stratification asbestos, as he believes the risk is still emerging.
of insureds based on where they sit in the PFAS “PFAS is a complex and evolving risk. We have
chain of commerce is a simple way to address known about it for 20+ years and while we have
different exposures. made some progress in understanding it, there
“Risk stratification is something that we know are still many unknowns. We don’t know how
resonates in the insurance industry as a reasonable widespread it is, what’s being tested, or how to
approach,” he said. best manage it. This makes it a challenging risk to
“But we also know some insurers are trying to get address, and it is likely to be a problem for years to
broadly worded exclusions. That’s obviously a way to come.”
go, but it’s not necessarily a way that maximises the
insurance industry’s value to its clients. The more Lessons from asbestos
you exclude from the insurance contract, the less The good news, according to Petersen, is that the
valuable that contract is.” industry now is much more sophisticated than when
it faced asbestos claims in the 1970s.
Future uncertainty “The 70s were very rudimentary – data
The need to provide coverage for PFAS to some aggregation was slow and there wasn’t as much
degree is derived from the fact that there is still a information-sharing across the industry as there is
significant amount of uncertainty over just how today. Now, monitoring the aggregation of exposure
many substances belong to the chemical family. is more sophisticated, as are treaty contracts,
facultative purchasing and the spread of risk across
And while the US Environmental Protection many carriers.”

Analysis: PFAS | 61
Praedicat’s Grossman added that, from a risk policies typically exclude coverage for pollution,
modelling perspective, a key lesson from the and in many cases, products,” he said.
asbestos crisis is to be more proactive. But drinking water contamination is only one area
“It seems like it’s not clear that the insurance of AFFF-related litigation, with the next scheduled
industry has taken that lesson. There’s a lot of set of bellwether trials focused on personal injury.
reactionary actions going on right now, such as “These are personal injury claims based on
trying to introduce exclusions in response to the consumption of drinking water allegedly
litigation.” contaminated with PFAS from AFFF. It’s the first and
Grossman also rejects broadest test of personal
US Environmental Protection
the label of PFAS as an injury and causation
evolving risk, arguing that claims, so that’ll be very
the advent of litigation
demonstrates that the risk
Agency’s actions on PFAS interesting,” said Lee.
If causal link is
has already passed that Date Details established between
stage. exposure to PFAS and
“Another lesson from Feb- Published formal PFAS Action Plan, including development of a personal injury, this may
asbestos is looking for 19 maximum containment level for states and local water utilities via the well open the floodgates
Safe Drinking Water Act, and developing new and better methods to
early warning signs in for further sectors to be
detect the chemicals in drinking water, soil and groundwater
places like scientific subject to litigation, such
literature,” he said. “That’s Dec- Announced new validated Method 533 for testing PFAS substances in as cosmetics, textiles,
where the risk starts 19 drinking water, taking the total number of measured chemicals to 29 cookware and other
emerging – it doesn’t start consumer goods.
Feb- Updated Action Plan to outline actions taken to address and
to emerge once people file 20 mitigate PFAS chemicals in the environment. Proposed regulations “We know this is a
lawsuits in court. on imported products containing PFAS chemicals used as surface potential risk to a number
“By the time the case coatings, under the Toxic Substances Control Act of industries, but at this
has emerged and the point it’s still hard to
claim is already in an Apr- Proposed the first Clean Water Act aquatic life criteria for PFOS and clearly define what that
20 PFOA. Also issued a memo to permit authorities to reduce PFAS
insurer’s system, they’re discharges at the source and obtain better monitoring information risk is going to look like
reduced to arguing about until the legal theories are
coverage, how much Jun- Issued first test order under the EPA National PFAS Testing Strategy, more established,” said
they’re going to pay, and 22 designed to provide key information on more than 2,000 similar PFAS Lee.
working with the insured that fall within these categories Grossman takes a
to help them find a Aug- Proposed designating PFOS and PFOA as hazardous substances more concise view: “If
settlement.” 22 under the Comprehensive Environmental Response, Compensation, an insurer is waiting for
and Liability Act the bellwether trial to
PFAS litigation adjust their underwriting
Dec- Proposed a rule to improve the reporting of PFAS to the Toxics
Owing to the volume of approach to PFAS, they’re
22 Release Inventory by removing the reporting exemption for chemicals
PFAS-related cases and a used in de minimis concentrations looking way too far back
lack of precedent, several in the rear-view mirror.
thousand cases based on Jan- Expanded ongoing study of PFAS discharges from textile manufacturers, “For any company
exposure to aqueous film- 23 as well as a new study of publicly-owned treatment works already involved in PFAS
forming foam (AFFF) – a Feb- Announced availability of $2bn from Biden’s Bipartisan Infrastructure litigation, you should
type of fire suppressant 23 Law to address PFAS in drinking water nationwide, allocated to states assume their entire
– have been consolidated and territories tower is at risk. Changing
into multi-district underwriting approach
litigation (MDL). Mar- Proposed establishment of legally enforceable levels for six PFAS for companies like that is
23 known to occur in drinking water
As part of the MDL, way too late.”
manufacturer 3M in Source: EPA website Grossman concluded:
June reached a $10.3bn “Insurers need to be
settlement for claims thinking about this
relating to public water systems contaminated from the basis of exposure to these latent risks.
by AFFF. However, Petersen noted that this eye- Understand what past risks are in your book now,
watering figure is highly unlikely to be borne by the how that relates to ongoing premiums and reserves,
insurance industry. and then figure out what pricing you need to make
“Pure manufacturers may not have had insurance those contracts sustainable. It’s not necessarily
for PFAS for a while because general liability uninsurable full stop.”

62 | Viewpoint: Renewals
Maintaining discipline and momentum

in an uncertain reinsurance market
Liberty Mutual Re’s Chantal Rodriguez on the Inflation and interest rate trends
While certain inflation trends at the macro
importance of maintaining discipline against level have moderated compared to a year ago,
an uncertain backdrop continued elevated loss trends and the evolving
dynamics between inflation and interest rates
T his year marked a significant shift for the reinsurance

market.
After several years of above-average loss experience
remain pivotal risks that need our continued
attention. The discipline that the industry has built,
focused on maintaining up-to-date exposure and
and below-average returns, reinsurers took the valuation data, as well as conducting continual
required actions to reposition themselves as resilient pricing assumption reviews, needs to be upheld.
industry leaders, adapting strategies for long-term Analysis needs to remain meticulous, reflecting
sustainability and returning to their core role of the significant variations in inflation trends across
providing capital protection. countries and the distinct underlying inflation
drivers that impact various lines of business to
Beyond one-time measures varying degrees.
Many of the external factors that precipitated the The current interest rate environment is of course
reinsurance market shift in 2023 have also elevating the cost of capital, which
not disappeared or reversed. While will require sustained focus on rate
reinsurers are in a strong position to momentum.
deal with these trends and have shown Climate change remains
Casualty lines in focus
themselves to be adept at adjusting to a
changing risk landscape, it is important
at the forefront of today’s Against a backdrop of increasing
to remain focused and disciplined. evolving risk landscape natural catastrophe losses and the
and the industry needs to war in Ukraine, the hardening of the
Climate trends
Climate change remains at the forefront
continue to advance its reinsurance market was particularly
pronounced for property cat, political
of today’s evolving risk landscape and the capability to analyse this risk violence and war-exposed treaties
industry needs to continue to advance its during the last 1.1 renewal season.
capability to analyse this risk. We need to While not entirely ‘new news’, the
stay focused on exposure management continued adverse developments on
and rigorous portfolio stress testing, while adequately pre-pandemic years for casualty lines, coupled with
reflecting climate and volatility trends in pricing the post-pandemic resurgence of corporate nuclear
and terms and conditions. Several events this year verdicts and uncertainties around forward-looking
have reminded us to expect the unexpected, with views on loss trends and emerging liability risks,
the extreme weather in New Zealand, the Hawaii mean these lines remain sharply in focus at the
wildfires and Storm Hilary being just a few examples. upcoming renewals.
Geopolitical uncertainty Maintaining discipline going forward

The heightened geopolitical uncertainties have As highlighted in these examples, we are operating
also not subsided. Strike, riot and civil commotion in a fast-changing world with evolving risks and
risk is ever present and evolving in an age of social uncertainty. As we look forward to the upcoming
media, as highlighted most recently by French riots. renewal season, therefore, it is important that
In addition, we must not only grapple with the momentum and discipline are maintained, and that
direct consequences of geopolitical tensions but also risk is assessed on a forward-looking basis with
anticipate the far-reaching implications that they may both insurers and reinsurers remaining focused on
Chantal
have on macroeconomic conditions. We therefore Rodriguez long-term sustainability.
need continued discipline to assess these risks is chief LM Re’s core role is to help clients through this
through holistic, forward-looking approaches. What underwriting uncertainty. We are committed to working with our
officer at
we have seen in the past is different to the challenges Liberty Mutual clients to find common solutions to successfully
we face today. Re navigate the ever-changing risk landscape.

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64 | Viewpoint: Insurtech
Are we at
an insurtech
inflection point?
As venture capitalists associated with reinsurers to a third of the insurtech ventures present during
that exuberant period have since ceased to operate
come to the fore, Gallagher Re’s Andrew Johnston
as viable businesses. These findings underscore the
explores a significant shift in global insurtech importance of prudent investment strategies and
funding and investment industry knowledge to ensure sustainable growth –
as well as resilience in the ever-evolving insurtech
B etween 2012 and 2021, investors poured an

impressive $42bn into insurtech firms.
A substantial portion of these investments came
landscape.
Has the $42bn been worth it then?
For insurtechs that have struggled, or the investors
in the dynamic years of 2019 and 2020, that backed them, probably not. What
when the insurtech theme gained it has done, however, is dramatically
remarkable momentum. We saw a spur the understanding and adoption of
surge in interest from generalist tech A good portion of the cash digital innovation among the insurance
venture capitalists and private equity that flooded in during this first industry’s established players.
firms, which flooded into the insurtech phase came from investors Many large P&C carriers have been
investment landscape. However, many trying to harness AI, for example, since
of these investors were notably lacking prepared to see it used to test 2010. At that time, AI would have been
a specific concentration in insurtech or and fail confined to a few small, specialised
a deep understanding of our industry. comapnies with limited applications.
At the peak of this insurtech What the first wave of insurtech did
investment craze, inflated valuations was bring these types of innovations
became commonplace. However, as we moved to the attention of the incumbents – and may have
into a higher interest rate environment in 2022, encouraged in-house investment in tech solutions.
the consequences of these lofty valuations became So much of the digital innovation we now see in
evident, causing significant and long-lasting damage. the marketplace may not be due to the insurtech
Our Q2 2023 insurtech report estimates that up firms’ own solutions being implemented, but it could
Quarterly insurtech funding volume – all stages

10,000
Life and Health Property and Casualty

8,000
$mn
6,000
5,296
4,824
4,000
3,127
2,552
2,538
2,410
2,348
2,225
2,100
1,987
1,865
1,591
1,558
1,504
1,389
1,443
1,414
1,258
2,000
1,000
1,014
917
912
825
725
633
592
412
422
314
376
328
300
271
233
180
180
135
132
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Gallagher Re

Viewpoint: Insurtech | 65
Number of venture investors in insurtech

1,400 1379
Number of venture investors in insurtech
1248
1,200
1,000
857 884
800 790
708
600
511 496
400 409
278
200
153 178
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD
Source: Gallagher Re
still be largely attributable to their existence. a more business-centric approach demonstrates

Importantly, a good portion of the cash that the commitment of these (re)insurers to leverage
flooded in during this first phase came from insurtech to its fullest potential and drive
investors prepared to see it used to test and fail. meaningful industry transformation. As an example,
This means that despite all the insurtechs that Munich Re Ventures led corporate venture activity
were unsuccessful, the net benefit to our industry among (re)insurers in Q2 2023, with six investments.
has been significant – arguably a good return for This type of sensible, measured activity, where
roughly a decade of research and development. experience and expertise are put at the heart of
That $42bn was spent to foster innovation in an innovation efforts, is a very welcome evolution in
industry that processes some $6trn of annual global the insurtech journey. It is certainly preferable to
premiums. Or to put it another way, a 0.07 percent being led to believe that the blockchain, for example,
research and development spend per year of our is going to revolutionise our industry on the strength
industry’s global premium. of its technological sophistication alone.
Corporate venture capitalists (CVCs) – or VCs If Q1’s results are any kind of indication for the
associated with (re)insurers – now represent a larger rest of this year, 2023 is set to be the largest year on
proportion of total insurtech investors than they record for (re)insurers to make private investments
ever have. Many of the world’s largest (re)insurers into insurtechs.
now have some kind of dedicated fund for insurtech The data points to a clear conclusion. The
deployment, or are at least being represented in emerging (re)insurance-related VCs have
an insurtech-specific investment fund (as a limited undoubtedly reaped the rewards of the substantial
partner, or LP). $42bn investment in research and development
In numerous instances, (re)insurers have gleaned over the last decade. Equally vital, they have
valuable insights from the investment strategies adeptly learned from past failures, prioritising a
employed by pure tech VC and private equity comprehensive understanding of the ‘what’ rather
funds. Consequently, they have fine-tuned their than succumbing to the allure of the ‘how’ and
value proposition, directing their focus towards inflated valuations.
the tangible business outcomes achievable through This strategic approach puts insurtech on a
insurtech, rather than being swayed solely by the promising trajectory, with a keen focus on business
allure of shiny technology in an industry that is often outcomes – a critical necessity for sustained growth
overestimated to be ‘ripe for disruption’. and prosperity.
Notably, a select few (re)insurer CVCs have taken
a proactive approach by involving underwriters in Dr Andrew The above is an extract from Gallagher Re’s Q2
the investment decision-making process, thereby Johnston is 2023 Global InsurTech Report, which highlights
global head of
placing the core business objectives squarely at the insurtech at a significant shift in global insurtech funding and
forefront of their endeavours. This shift towards Gallagher Re investment, published in August 2023.

66 | Viewpoint: Data
The high cost

of low-quality
reinsurance data
Supercede’s Jerad Leigh highlights how bad platforms, technology in isolation isn’t the magic
data can lead to higher costs and lower trust bullet. Cedants should be diligent in the data shared
to their partners, and reinsurers and brokers must
A newly released report from Supercede sheds light

on the detrimental effects of inconsistent and
inaccurate data on the reinsurance industry. Garnering
clearly and transparently articulate what they need
in order to secure the best terms and pricing.
The newer generation of professionals, who are
insights from candid discussions with underwriters, innately more attuned to data-driven processes
actuaries and brokers, the report reveals the issues rather than manual drudgery, are frustrated. They
arising from unreliable data exchanged between cedants, see the huge potential of leveraging AI-enabled
brokers and reinsurers. platforms but are held back by the bad data they
The overarching consensus: bad data erodes receive, and the systems used to organise that data.
efficiency in the global reinsurance value chain, This issue affects everyone across the reinsurance
leading to higher costs and lower trust. value chain. Clear and easy-to-use data will unlock
unparalleled efficiency, orders of magnitude greater
The price tag of uncertainty than what practitioners use today.
One of the most immediate consequences of sub-par
data becomes evident during renewal season. The veil Elevating standards for collective gain
of uncertainty cast by such data compels reinsurers The main message is clear: good data is not just
to implement significant “pricing loads”, often to the nice to have, it’s essential for best results. And
tune of 5-10 percent or more. Reinsurers have no cedants are in a key position to drive this change.
choice but to penalise bad data, and it means cedants By championing data integrity, they can pave the
end up paying more. way for brokers and reinsurers to step in as true
Additionally, the very integrity of submissions collaborators. Alternatively, cedants can continue
comes under scrutiny, leading underwriters to to send poorly structured and opaque data into
sometimes withhold capacity. Moreover, this data the market to absorb the inflated premiums and
dilemma also impedes the growth of new tools reduced value provided by their most trusted
designed to improve the industry – tools which need partners who will move them further down their
good data to work effectively. to-do list in favour of their competitors. The choice
Looking closer, we see professionals are spending seems obvious as the rewards of upholding elevated
more time fixing mistakes rather than using data to standards promise a brighter, more efficient future
get helpful information. Instead of harnessing data to for all stakeholders.
draw valuable insights, practitioners find themselves The repercussions of poor reinsurance data are far-
ensnared in the daunting task of wrestling with reaching, affecting every aspect of the industry. With
spreadsheets. increased costs, strained relationships and hindered
This means excruciating cycles of error detection technological advancements, it’s evident that quality
and rectification that test both patience and data is vital moving forwards. As the digital age
professional relationships. And the ones bearing continues to evolve, it’s crucial for all players in the
the brunt of this work are often the understaffed reinsurance sector, especially cedants, to prioritise
underwriting teams who, in their bid to prioritise, data integrity. By doing so, they not only streamline
delay addressing problematic accounts, naturally operations but also pave the way for innovation and
focusing their attention on the cedants with cleaner collaboration, ensuring a prosperous future for the
data submissions. entire industry.
Jerad Leigh
Reinsurtech and revolution is CEO at Access the full whitepaper The Reinsurance Data Crisis
While there’s excitement about emerging data Supercede at www.supercede.com.

We connect the
dots, so you
don’t have to
One loss event can draw mutiple insureds in
an event and clash multiple times within a
single portfolio.
That is the power of Connected Risk.
At Russell, we work with our clients to join up

the dots to get a deeper understanding of
exposure through scenario analysis.
This enables clients to optimise their net

portfolio exposure after (re)insurance
and/or risk financing.
russell.co.uk/analysis
IMAGINATION TO CREATE
68 | Viewpoint: Wildfire Loss Assessment
A rapid data response to wildfires

ICEYE’s Penelope Kourkouli and Stephen Lathrope address how satellite technology
offers a potential game-changing capability for wildfire loss assessment
2 023 has witnessed a surge in major wildfires due to

warmer, drier conditions intensifying events globally.
Even regions previously considered too wet or humid are
An SAR satellite constellation can target wildfire
events anywhere within hours, acquiring radar
images of the same location every 24 hours, which
now increasingly exposed to wildfire events. enables an unprecedented level of change detection
In recent months, Canada has been tackling one of as the fire evolves. Monitoring criteria can then be
its worst wildfire seasons to date, while the island of applied to trigger high-resolution data capture when a
Maui in Hawaii has been devastated by fires. Greece, wildfire reaches a specific distance from a built-up or
Italy and Spain have also experienced multiple major highly populated area.
events. Applying algorithms to the SAR
As air temperatures continue to rise imagery and location intelligence data
and urbanisation near increasingly dry enables an accurate assessment of
wildland-urban interface zones expands, The complexity inherent in the number of individual buildings
so the frequency, spread and severity of wildfire events makes them destroyed and undamaged in an
wildfires will grow, making the question impacted area within hours. This
of insurability an increasingly pertinent
incredibly challenging for means insurers can conduct rapid loss
one for the insurance sector. insurers to monitor and assessments, communicate immediately
manage effectively with impacted policyholders, target
Data limitations hampering response resources effectively and accurately
The complexity inherent in wildfire allocate funds for property loss and
events makes them incredibly accommodation costs.
challenging for insurers to monitor and manage While only recently launched, ICEYE’s Wildfire
effectively. Wind and fuel conditions can quickly alter Insights solution has been actively used by
the size and direction of an event, and distance from government agencies and insurers to gain rapid
built-up areas can change very quickly, dramatically situational awareness during recent events, including
altering an event’s exposure potential. the wildfire in Maui.
While a few wildfire data sources exist, their
effectiveness is hampered by the time taken to access Fanning the potential
impacted areas, the limited availability of information Offering near real-time hazard data can greatly
as an event develops, the effects of smoke on aerial enhance the insurance sector’s response capabilities.
imagery and the need to pull insights from multiple While the application of SAR technology to wildfires
different sources. is in its relative infancy, the scope of uses will likely
This data shortfall stalls multiple critical phases of evolve quickly.
the insurance process, including speed of assessment, Insurers will be able to monitor wildfire
policyholder communications, proof-of-loss activity globally, mapping portfolio data to hazard
capabilities and claims processing. information almost instantaneously as particular fires
develop. ICEYE is also exploring ways to extend the
Penelope
How SAR satellite technology is piercing the smoke Kourkouli impact data beyond properties to include motor and
The development and deployment of miniaturised is Wildfire agricultural losses.
synthetic aperture radar (SAR) technology marks a Insights Further, the rapid access to accurate, verifiable,
product
step-change in how companies can monitor wildfire manager ground-level data will also inevitably act as a catalyst
events. SAR imagery can pierce smoke and provide and Stephen for the development of wildfire-related parametric
high-resolution ground imagery as an event evolves. Lathrope is structures as the public and private sectors explore
global head of
Further, being miniaturised, it can be integrated into insurance at innovative and responsive solutions to the challenges
satellites much more efficiently and cost-effectively. ICEYE of insurability.

Covering a broad array of casualty, property
and specialty reinsurance products, the
Cincinnati Re team brings extensive
experience and technical acumen to each
underwriting decision.
Placing reinsurance business with Cincinnati

Re provides ceding companies highly rated,
diversifying counter-party credit.
The Cincinnati Insurance Company

Financial Strength Ratings
A. M. Best A+
S&P Global Ratings A+
Fitch Ratings A+
Moody’s Investors Service A1

70 | Viewpoint: Underwriting Strategy
The measured approach

IGI CUO Chris Jarvis explains how a commitment when required while remaining selective about
new growth areas. For example, IGI entered the E&S
to discipline has helped the company outperform market in 2020, and compared to some of our peers
its peers who are writing hundreds of millions of dollars of
business because of attractive conditions, IGI has
IGI’s combined ratio has been below 90 percent remained focused on a narrow segment of this
in eight of the last 10 years – how do you achieve business, which we are confident we understand.
such consistency?
Our consistency in performance comes up a lot in What areas will you be targeting next?
conversations with industry professionals. They
always want to know what our ‘secret sauce’ is. The We have built an excellent platform for supporting
answer is always the same: hard work, discipline a diversified portfolio of specialty business, and
and underwriting focus. we are in a strong position to tackle any new
We have strong core principles that we stick to, opportunities and build out existing lines still in
one of which is understanding the business we their infancy.
write at a granular level. We work We have increased our reinsurance
collaboratively and approach our treaty segment materially for 2023.
business with a ‘single hub’ philosophy. Historically, IGI has had a modest treaty
The market has experienced a lot of We have increased our reinsurance offering, around 5 percent
so-called black swan events in recent reinsurance treaty segment of the overall group premium – our
years, and the firms recording outsized
materially for 2023 current strategy is to increase that to
losses have done so mainly because at least 10 percent, given the improved
of understating the materiality of conditions and opportunities. But as
their aggregate exposures or not fully with everything we do, we will proceed
considering the maximum possible cautiously in a measured fashion with
downside. IGI takes a cautious and measured close attention to our maximum possible downside.
position in every business class in which we operate.
Our approach has proven extremely effective over What will we see from IGI’s underwriting strategy
time, especially during soft market cycles. But to for the rest of 2023 and going into 2024?
continue underpinning IGI’s long-term profitability,
this approach may need to be adjusted slightly to Our strategy will remain as it has always been: a
allow us to fully capitalise on improved market cautious and measured approach to disciplined and
conditions and pursue a higher-growth model. focused underwriting in every class of business.
However, our fundamental principles for managing The focus on underwriting diligence is central to
risk and exposures are the backbone of our everything we do, which has helped sustain our
achievements and an unwavering part of our DNA. profitability throughout the years.
With that in mind, we are enhancing several
How so? pricing tools and processes to improve pricing
techniques, especially in some of our smaller
We recognise that hard market conditions are classes. We are investing in exposure management
emerging in some classes, but not all sectors, so a to provide us with greater control and access to
more nuanced approach is required. We see harder real-time data for the enhanced management of
conditions in areas such as short-tail property and our overall portfolio. And we are also growing
reinsurance, and adapting to a new landscape is the our internal delegated underwriting framework,
challenge we now face but is something we have resources and controls to give us better insight,
always done well. Despite our growth, IGI is still a control and management of our delegated
relatively small fish operating in a big pond, but our Chris Jarvis is underwriting facilities, which will create the right
size enables us to be truly nimble and move quickly CUO of IGI environment to underpin growth in this area.

72 | Viewpoint: Connected Risk
Unravelling uncertainty in
the changing risk landscape
Russell Group’s Suki Basi on why understanding with holistic connected risk insights and continued
value, in a manner already demonstrated to the
the rapidly changing risk landscape requires a world’s media during the events of recent years. A
new kind of thinking clear example of this was our analysis of the impact
of disruption to the flow of trade ($3.4trn) in the
A s I outlined in my first article for The Insurer at

this year’s Monte Carlo Rendez-Vous, Russell
Group has been engaged in a number of connected
Malacca Strait caused by a potential geopolitical
event involving China, Taiwan and the US. This
is why an enterprise-wide view of outcomes is
risk projects with Lloyd’s managing agents to quantify required by exposure managers and (re)insurers to
intangible risks within plausible threat scenarios such model the exposure and manage their risk transfer
as Russia-Ukraine, China-Taiwan, digitalisation and requirements. Forward-looking connected risk
casualty clash. insights enable future analysis and the ability for
This is a landmark moment for companies to handle risk proactively
Russell. It connects long-standing across their portfolio and build
clients with the journey to unravel resilience.
uncertainty and deliver opportunity, Understanding this rapidly
through collaboration and forward- changing landscape requires Connected impact analysis
looking analysis – something we enabled a new kind of thinking and the Understanding this rapidly changing
30 years previously with our work landscape requires a new kind of
on Lloyd’s Equitas and subsequently development of new skills thinking and the development of
with the aviation reinsurance market new skills. Russell has quickened
questionnaire. our machine learning and artificial
intelligence journey. We now have the
Client solutions capability to provide a connected impact analysis,
The project connects multiple in-phase initiatives at helping clients and their teams to understand
Russell that incorporate much of our thinking over consequences of disruption caused by grounded
the past few years. It is part of our transformation airline fleets, war, clash, claims inflation and
journey to collate and process data, and then use it business interruption, for example. What are
to drive and develop solutions which align with our the threat scenarios? Once understood, we can
strategy to build client value for the existing (re) generate scenarios for global threats to apply to
insurer and new corporate client base. For example, client portfolios. Is it insured or not? We want to
the Russell team works with 15 data supplier determine covered and uncovered exposure. What is
partners to ensure that the latest data is available, the gross/net calculation? This knowledge will help
cleansed and name-matched to provide the insights to calculate covered scenario exposure gross and net
that clients require to visualise their exposures of (re)insurance for client portfolios. Lastly, is our
across the aviation, marine, energy and casualty model forward-looking? If so, we can then identify
classes. Suki Basi, current and future exposure concentrations within
managing
It is through this investment in and connection of director at
a portfolio for an event, location, industry sector or
multiple data sets that we aim to provide our clients Russell Group supply chain.

Reinsurance & More
R e n d e z -Vo u s
de Septembre
We h o p e t o s e e
you there!
2023 - Monte Carlo
https://www.ccr-re.com
74 | In memoriam: Michael Butt
Today we continue to look back at some of the

industry titans we have lost over the past 12
months and remember a pioneer of Bermuda’s
insurance industry…
Michael Butt
M ichael Butt, who passed away in February at the

age of 80, enjoyed an illustrious reinsurance career
that saw success in both the London and Bermudian
of Sedgwick Group before moving on to become the
chairman and CEO of Eagle Star Holdings and Eagle
Star Insurance Company. A popular industry figure,
markets. Butt was known for his urbane presence and charm.
Announcing the news, Axis’ then CEO Albert
Benchimol described the erstwhile Eagle Star CEO Benchimol: “More than a captain of industry”
and Sedgwick chairman as a “towering figure” in the Benchimol also touted Butt as a “passionate advocate
industry. for education”, highlighting Butt’s support for his
Butt had joined Axis in the months after the firm alma mater INSEAD – where, in 2022, Axis celebrated
was co-founded by John Charman and longtime the executive’s service by establishing the Michael
Marsh McLennan executive Bob Newhouse in the A. Butt Fund for Business and Society to support the
wake of the terrorist attacks on 11 work of the Hoffman Global Institute for
September 2001. Business and Society.
He served as the company’s chairman Butt had been the chairman of the
on joining in 2002, returning to the role Over the course of his five- INSEAD International Council from 1988
in 2012 following Charman’s departure decade career, he was a to 1991 and also held board positions
from the company and remaining until
builder of businesses, a with the Association of Bermuda
September 2020. Insurers and Reinsurers – including
Alongside his roles at Eagle Star builder of markets, and a periods as its chairman and vice chair.
and Sedgwick, Butt’s career also passionate voice on issues However, Benchimol highlighted that,
encompassed a stint as
such as climate risk and “on a more personal note, Michael was
CEO of MidOcean, as well as director so much more than a captain of our
roles at XL Capital and Farmers building a more sustainable industry”.
Insurance Group. world “He was a counsellor and a mentor, a
Benchimol said Butt had “played compassionate leader, and a wonderful
a pivotal role” in Axis’ development, friend. He cared deeply about helping
“guiding Axis from a start-up into an others and opened doors for countless
established player in our industry”. young professionals, particularly those from
“Over the course of his five-decade career, he was disadvantaged backgrounds,” Benchimol shared with
a builder of businesses, a builder of markets, and a his colleagues.
passionate voice on issues such as climate risk and “For a man of his stature, Michael was incredibly
building a more sustainable world,” Benchimol wrote humble – and incredibly human,” Benchimol
to staff. continued.
“In 2008, Michael was awarded the Bermuda “Beyond being a brilliant business leader
Institute Lifetime Award,” Benchimol noted, while who always carried himself with charm and
adding that in 2011 Butt was appointed an Officer of elegance, Michael was also a lot of fun – smart and
the Order of the British Empire (OBE) in recognition intellectually curious, with a razor-sharp wit,” he said.
of his contributions in building the Bermuda “It gives me some comfort that in his final days
reinsurance industry. and months, Michael was surrounded by loved ones,
He was voted into the International Insurance including his wife Zoe and his family,” Benchimol
Society’s Insurance Hall of Fame in 2019. added.
Before his Bermuda achievements, Butt had He concluded his remarks: “Please join me in saying
enjoyed a successful career in London, including as farewell to Michael and perhaps savouring a glass of
chairman of Sedgwick Limited and vice chairman Johnny Walker Black in his honour.”

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theinsurer.

com Daily edition two

MONTE CARLO RENDEZ-VOUS

• CYBER RE • TOP 10 REINSURANCE BROKERS • CAPITAL RAISES • CASUALTY ANALYSIS

Zeller and Arora fundraising for $1bn

F ormer Hannover Re CEO Wilhelm

AerCap deal creates settlement framework that

A viation (re)insurers and executives

You care about

Ageas Re doubles property cat line size

A geas Re, the reinsurance arm of

Fronting market surges to $13bn as

theinsurer.com | #ReinsuranceMonth Monte Carlo Rendez-Vous 2023 | Day 2

Inside this edition

Day 2 | Monte Carlo Rendez-Vous 2023 #ReinsuranceMonth | theinsurer.com

Vesttoo: A fraud waiting to happen...

theinsurer.com | #ReinsuranceMonth Monte Carlo Rendez-Vous 2023 | Day 2

Fears of regulatory overreach on

A s global (re)insurance leaders gather

Continued from page 1

Zeller and Arora fundraising for $1bn

Day 2 | Monte Carlo Rendez-Vous 2023 #ReinsuranceMonth | theinsurer.com

Discover more at www.libertymutualre.com

Clear Blue replaces Vesttoo reinsurance for all

H ybrid fronting carrier Clear Blue has

Former Canopius UK CEO Willmont to join Lockton Re

Day 2 | Monte Carlo Rendez-Vous 2023 #ReinsuranceMonth | theinsurer.com

To help our clients make better decisions, we are building

Discover more on our Reinsurance Renewal Season Platform.

Richardson: The modern

E xisting structures that have been in place for 20-

Day 2 | Monte Carlo Rendez-Vous 2023 #ReinsuranceMonth | theinsurer.com

Swiss Re’s da Victoria Lobo: SRCC risks

R einsurers are increasingly concerned

GC’s David Priebe: This is most attractive

Investors are seeing the most

Day 2 | Monte Carlo Rendez-Vous 2023 #ReinsuranceMonth | theinsurer.com

This year at RVS Monte Carlo, we look forward to celebrating

Here’s to the next

Continued from page 6

Fears of regulatory overreach on LOCs as Vesttoo scandal deepens

Talking points performed well as a collateralisation mechanism for

Day 2 | Monte Carlo Rendez-Vous 2023 #ReinsuranceMonth | theinsurer.com

US collateral requirements vary for reinsurers depending on status

theinsurer.com | #ReinsuranceMonth Monte Carlo Rendez-Vous 2023 | Day 2

Is there correlation between

I s there correlation between cyber events and stock

Day 2 | Monte Carlo Rendez-Vous 2023 #ReinsuranceMonth | theinsurer.com

Reinsurers showing increased

C yber reinsurance capacity has increased while

Day 2 | Monte Carlo Rendez-Vous 2023 #ReinsuranceMonth | theinsurer.com

see progress when it comes Association war exclusions,

theinsurer.com | #ReinsuranceMonth Monte Carlo Rendez-Vous 2023 | Day 2

Day 2 | Monte Carlo Rendez-Vous 2023 #ReinsuranceMonth | theinsurer.com

Find out more at acrisurere.com

Black swans in plain sight

T he terrorist attacks of 9/11 22 years ago stand out

Day 2 | Monte Carlo Rendez-Vous 2023 #ReinsuranceMonth | theinsurer.com