Navigating today’s market challenges

Odyssey Re CEO Carl Overy examines the market outlook ahead of becoming Odyssey Group CEO next year.

How is Odyssey Group prepared to handle this year’s anticipated record-level hurricane activity?

We’ll wait and see what happens with this year’s hurricane activity. If the market sustains significant losses this season, we are in a great position to weather the storm and take advantage of the ensuing dislocation given the strength of our balance sheet, broadly diversified portfolio and solid earnings outlook.

Turning to casualty, how would you describe current market conditions?

We continue to find the casualty reinsurance market generally attractive, but not uniformly so, depending on class, client and terms. Original rates are up, and coverage terms have tightened in many areas, but there is need for improvement given continued adverse deterioration in prior years and an increasingly litigious environment. As a baseline, rates need to stay ahead of loss trends, but underwriting success requires broadly-based client capabilities. We look for cedants with strong risk selection, superior claims handling and related prior-year reserving, and a transparent and data-driven strategy for navigating the market across the underwriting cycle.

As a significant player in global cyber reinsurance, what challenges do you foresee given the increased activity of threat actors and the potential for large systemic events?

In the last year or so we’ve seen primary market rate reductions greater than expected, increased cat loadings from the latest cyber models, and upwards pressure on ceded commissions. All this has served to reduce the expected margin for reinsurers. Offsetting this, cedants have been retaining more, which, in a way, gives us comfort in that they have confidence in their portfolios. Consequently, our market position has remained unchanged.

The CrowdStrike event should serve as a wake-up call for the (re)insurance industry, highlighting the risk of a systemic event from a single point of failure, and should prompt a re-evaluation of product coverage and waiting periods. It also raises the question of how malicious and non-malicious system failures should be distinguished. Unfortunately, the global impact also serves as a valuable case study for threat actors, providing them a tangible example of what can be achieved through compromising software supply chains. Our hope, and expectation, is that companies will take the learnings from this event to build better resilience into their organisations to withstand future events.

How is OdysseyRe navigating the D&O market?

We continue to keep a close watch on rate levels and limit deployment. Fortunately, we have not seen any creep in limit deployment so far. Utilising internal tools that we have developed, we can monitor our clients’ portfolios for SCA frequency exposure, product line composition, price adequacy and diversification by market cap size and industry subgroup. By understanding the underlying exposures at a detailed level, we gain insights into the cedant’s risk selection and the likelihood of material D&O claims within those portfolios. This provides us with confidence to increase our participation with certain clients and gives us a competitive edge, as we can observe sound portfolio management.

It was announced that you will be succeeding Odyssey Group CEO, Brian Young, in 2025. What are your top priorities?

Stepping into the Odyssey Group CEO role is a great honor, and Brian has certainly left me big shoes to fill. Thanks to Brian’s leadership and the support of our parent, Fairfax, Odyssey Group is in the best position it has ever been. My fundamental priority will be to maintain what has already been built, whilst preserving our achievements and unique culture. We have fostered highly skilled, long-tenured teams that collaborate effectively across our businesses, all united in a common goal with a clearly defined risk appetite and focus on the bottom line.

Attracting young and diverse candidates to ensure a robust pipeline of future talent and nurturing our people remains essential. Finally, leveraging data analytics and AI will provide underwriters with fresh perspectives on the underlying risks within their portfolios. Exciting times lie ahead.