In this interview with The Insurer TV, Dan Becker, Guy Carpenter’s CEO of Global Strategic Advisory, mentions how increases to attachment points at recent reinsurance renewals had dampened profitability among primary carriers.
“We see increases in attachments and retentions as a bigger factor (than higher premiums) for most carriers,” he said.
For primary insurers, he continued, the impact of increased retentions was particularly pronounced given the macroeconomic factors impacting the industry, ranging from economic factors such as inflation, to climate, societal and geopolitical risks.
“Even in the reinsurance space, most of the challenge has been at the attachment level,” Dan explained. “Supply, generally speaking, has been adequate, and companies, more or less, have been able to continue to purchase the limit they need to support their obligations to stakeholders, like regulators and rating agencies. But that attachment level, again, is driving some issues around profitability.”
Dan said that primary insurers can take steps to underwrite more profitably through modernizing pricing approaches, incorporating new models into their business and reviewing portfolio construction. One opportunity Dan suggested is for carriers to increase their use of alternative capital, indicating how 2023 is emerging as a burgeoning year for catastrophe bonds.
“If you look at both sponsor demand, and seller demand, it’s been huge,” Dan added. “We’ve seen a record number of new sponsors in the first half of the year.”
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