Leadenhall’s Discipline Warning Clashes with Forecast of 10% Rate Pressure; Howden Re Launches Parametric Unit
By The Reinsurance Daily Editorial ·
Leadenhall’s Discipline Warning Clashes with Forecast of 10% Rate Pressure; Howden Re Launches Parametric Unit
ILS Market Discipline Critical as AUM Reaches $120bn, Warns Leadenhall
Leadenhall Capital Partners CEO Lorenzo Albertini has issued a direct warning on underwriting discipline, stating the ILS market must avoid the mistakes of past renewal cycles where excess capital led to irrational pricing. The total ILS market AUM has recovered to $120 billion, nearing its previous peak. This recovery includes significant growth in the catastrophe bond segment, which now stands at $65.6 billion outstanding, reflecting $25.6 billion in growth since the beginning of 2023. Albertini cautioned against deploying capital too aggressively into a softening market, emphasizing that investors are now more sophisticated and demand sustainable, risk-commensurate returns after several years of trapped capital and poor performance. He contrasted the liquid cat bond market's growth with the more modest recovery in collateralized reinsurance, which has seen AUM increase by approximately $18 billion.
"We must avoid being carried away and repeating the same mistakes of the past, so we can’t just go and deploy capital whatever the price, whatever the conditions." — Lorenzo Albertini, CEO, Leadenhall Capital Partners
PwC Quantifies Value of Underwriting Discipline at 7 Points of RoC
A report from PwC highlights the material impact of underwriting discipline, calculating it can add up to seven percentage points to return on capital. The analysis points to the performance gap between top-quartile Bermuda reinsurers, which achieved an average return on equity of 14%, and the market average of 9.1%. This differential is attributed almost entirely to superior underwriting and risk selection, rather than investment returns, demonstrating that technical profitability remains the primary driver of outperformance.
Howden Re Establishes Parametric & ILS Capital Markets Unit
Howden Re has launched a new global practice focused on parametric reinsurance solutions and capital market-driven insurance-linked securities (ILS). The new unit, Howden Re Parametric & ILS, aims to develop non-traditional risk transfer products that offer faster, more transparent claims payouts based on pre-defined triggers. This initiative reflects a structural move by the broker to build out capacity in areas that provide cedents with outcome certainty and investors with risk that is delinked from the complexities of traditional loss adjustment.
Guy Carpenter Strengthens Healthcare Practice with Hire from BMS
Guy Carpenter has appointed Michael Ciak as a Senior Vice President in its Healthcare & Life Science Specialty Practice. Ciak joins from BMS Group, where he served as a senior vice president, and brings extensive experience in the medical professional liability sector. This move signals a reinforcement of expertise in a highly technical and profitable specialty line. The CRC Specialty division, another significant market entity, is part of Truist Insurance Holdings which reported revenues of $17 billion. Ciak’s hire underscores brokers' focus on talent acquisition in specialty classes that command technical pricing and are less susceptible to commoditization.
Analysts Project Sustained Reinsurance Rate Pressure Through 2027
Viewpoint analysis indicates that global reinsurance pricing is set to decline, with potential rate decreases of 5% to 10% annually through 2027. The primary driver is the significant recapitalization of the sector and the return of alternative capital, which is now estimated at $42 billion and growing. After a period of record returns, new capacity is entering the market seeking to deploy on high-attaching property catastrophe layers. Competition is expected to be most intense for non-loss-affected programs, with reinsurers fighting to maintain market share and cedents leveraging the increased capacity to improve terms and lower costs, potentially pushing combined ratios from a sector average of 85% back towards the mid-90s.
Cincinnati Insurance Appoints New Chief Claims Officer
The Cincinnati Insurance Companies has announced that Eric N. Schambow, Senior Vice President and Chief Claims Officer, will retire on October 1, 2026, after a career of over 40 years with the company. He will be succeeded by Teresa C. McMillan, who currently serves as Senior Vice President of claims operations. The company's property casualty operations recently reported a statutory combined ratio of 40.7%, indicating strong underlying profitability during this leadership transition within a critical function of the organization.
Key Takeaways
- The warning on discipline from Leadenhall (Sec 1) is in direct tension with market forecasts of rate decreases up to 10% (Sec 5), indicating a potential clash between ILS investor return hurdles and traditional reinsurers competing for market share.
- With PwC data showing underwriting discipline can be worth up to 7 points of RoC (Sec 2), treaty underwriters should challenge cedents for more granular data on attritional loss trends to isolate and price for accounts that are dragging down portfolio performance.
- Howden Re's new parametric unit (Sec 3) is a structural response to the trapped capital and loss creep issues that have plagued the collateralized reinsurance market (referenced by Sec 1), offering a path to more transparent and liquid risk transfer for both cedents and investors.
- The forecast of sustained rate softening through 2027 (Sec 5) while climate and secondary peril models are still being recalibrated presents a dislocation risk; reinsurers may lower prices based on new capital inflows before the technical cost of risk is fully understood.
Sources
ILS success hinges on discipline, avoiding past renewal mistakes: Albertini, Leadenhall — artemis.bm
Staying disciplined on underwriting worth up to seven points of return on capital: PwC — artemis.bm
Howden Re launches new unit with parametric reinsurance and capital market ILS focus — artemis.bm
People Moves: Ciak Joins Guy Carpenter’s Healthcare Team From BMS Group; CRC Specialty Makes Hires Across Underwriting and Brokerage Teams — insurancejournal.com
Viewpoint: Global Reinsurance Pricing to Remain Under Pressure Through 2027 — insurancejournal.com
People Moves: Cincinnati Insurance Chief Claims Officer Schambow to Retire, McMillan to Assume Responsibilities — insurancejournal.com