IGI’s Loucaides: Don’t “go off a cliff” with property rates amid lower H2 cat activity

Reinsurers should not “go off a cliff” with property rates at 1.1, IGI’s Andreas Loucaides has argued, with the executive underlining that a relatively benign Atlantic hurricane season to date should not lead to a significant reduction in prices.

Speaking to The Insurer on the sidelines of the Rendez-Vous de Septembre, IGI’s UK CEO Loucaides noted that, to date, Atlantic hurricane activity has been relatively subdued.

Although Hurricane Beryl became the earliest Category 5 hurricane on record in the Atlantic Basin – and Tropical Storm Francine is expected to make a Category 1 landfall on the Gulf Coast later this week – forecasts of a high level of activity have so far failed to manifest.

“From an insured perspective, nothing is moving the market. I think this year, a lot will depend on the hurricane activity, because the market is in good shape across most things,” said Loucaides.

“If nothing happens, there’s going to be a lot of pressure on the fact that people have made a lot more money, so capital will flow back into the balance sheet. It will be interesting to see what would happen at 1.1, to see how hungry and aggressive they’re going to be, coming off almost two and a half years of profitable business.”

Loucaides underlined the importance of reinsurers maintaining discipline across terms and prices, amid wider market expectations that players are more likely to exercise some flexibility on price than to lower attachment points or loosen terms and conditions.

“I’m hoping that people have a resolve to keep the market strong, rather than go for volume and top-line growth, and basically move the prices down. That’s not what we want. The market is coming off a bit, but what you don’t want to do is go off a cliff,” he said.

“We’re a silly market, really. We go up and down like a yo-yo. Any market has ups and downs, but the difference with us is that we don’t really know the price of our product. We’re assuming a lot of things and we hope we got the pricing right, but that will only tell in the long term.”

As according to IGI’s philosophy, expansion of the Bermuda-based player has only taken place during hard market cycles with greater price adequacy.

“At the moment, we’re holding our breath a bit. We’re in a situation where we do want to grow, but we’re still very focused on the bottom line and we’re not going to grow unless that is the situation,” Loucaides added.

International growth

Nevertheless, Europe remains a key international growth market for IGI, with Loucaides explaining that this strategy is generally focused on supporting MGAs.

For example, last year IGI acquired Norway-based MGA Energy Insurance Oslo AS – a vehicle with which it had an exclusive underwriting agency partnership since its formation in 2009 – in order to expand its Nordics offering under the new brand of IGI Nordics.

Originally focused on energy, IGI Nordics has since expanded into professional and financial lines, including professional indemnity, D&O, and financial institutions.

“They started in January so we missed the 1.1 renewal, but they did extremely well in the first six months. It’s a great opportunity for us to now build that out,” Loucaides said.

“We’re not saying no to M&A, if there is something that turns up and it’s a great opportunity, we’re not going to turn it down. Our message for our European business is that we’re trying to grow our business across all lines, and one of the major areas of doing that in Europe is supporting MGAs. Whether that turns into buying them in the end, that may happen.”

As well as Europe, the US presents an opportunity for expansion, although this will be focused around the classes of property, engineering and energy. IGI does not write a US casualty book.

“I think casualty in the US is one of those areas where if you don't know, it’s best not to dabble. It’s long term and it can seriously hurt you,” Loucaides concluded. “Whereas with property and energy you know where you are if something happens, with casualty it can come back 10 years down the road and bite you.”