The Insurer TV: Aspen targets property cat margin growth amid “dearth of capacity”

Aspen Reinsurance’s chief underwriting officer Andrew Rippert has told The Insurer TV the group will be targeting property lines for margin growth – especially property cat – despite many carriers reducing appetite in this area.

During the latest episode of Close Quarter, Rippert set out his plans for the reinsurance unit following a period of “significant remediation”, which saw the carrier reduce exposure to California wildfires and exit credit and surety lines of business.

Speaking to The Insurer TV about his expectations for the 1 January renewals, Rippert said Aspen will strengthen its position by capitalising on the “best opportunities”.

“Probably the best opportunity out there from our point of view in the market is with some of the property lines,” Rippert said.

“So property catastrophe in particular … there’s a dearth of capacity out there in the market, the prices have firmed up.”

Aspen’s strategy is in contrast to a wider industry trend that has seen some carriers reduce their appetite for property cat business, prompting some commentators to warn of a capacity crunch.

As highlighted in a recent AM Best report, reinsurers have been shifting their exposures towards excess and surplus lines, casualty lines or primary specialty business.

But despite a reduced appetite, Aspen will continue to focus on growing through its property and property catastrophe portfolio, as it sees “great pricing opportunity” in this part of the business, Rippert said.

He added: “We’re thinking about our strategy while managing our peak exposures and our PMLs [probable maximum losses], but also thinking about tier two and tier three exposures, how they’re being priced and how they’re being placed in the market.”

Rippert said this strategy was a point of focus for Aspen ahead of the 1 January renewals, alongside rightsizing the reinsurance portfolio.

Aspen significantly reduced its appetite for cat business following its acquisition by Apollo in 2019, reducing its exposure to US cat, California wildfires and Japanese windstorms. The move followed three successive years of high cat losses which eroded the company’s capital base.

The move to grow premium volume in the property cat space comes amid a period of sustained hardening which is expected to continue into 2023.

US property catastrophe reinsurance rate increases have accelerated over the past year amid a reduction in capacity, with further upward momentum expected at upcoming renewals. As Guy Carpenter’s rate on line index demonstrates, rates have broadly shown upward momentum since 2017 following an uptick in loss activity after a prolonged period of softening.

In Gallagher Re’s mid-year renewals report, the broker reported that, on a risk-adjusted basis, rates were up between 15 percent and 25 percent on catastrophe XoL accounts hit by losses, and between 5 percent and 10 percent on loss-free risks (see table).

The Aspen Re CUO said he remains cautious as he looks ahead to the renewal. While on the subject of key talking points at this year’s Rendez-Vous de Septembre, Rippert said: “It will be interesting in Monte Carlo to hear about and work on as we move into the 1.1 renewals, what is the impact of inflation and inflationary trends in the market [and] how’s that impacting losses and pricing?”

Geopolitical tensions are also front of mind for Rippert.

“We’re all well aware of the Russian and Ukraine conflict and what that meant for losses or potential losses in the reinsurance market. And now we’re seeing geopolitical tensions with the People’s Republic of China, relative to Taiwan. So we’re thinking about what that means and thinking about terms and conditions, contract language and opportunity.”

Unbundling of exposures to open “pricing power” opportunities

Discussing the opportunities across the market this year, Rippert pointed to significant changes in the aviation segment following Russia’s invasion of Ukraine.

“If you take a look at the aviation market, you have to look through the major airlines, the more general airlines, more exposure … and it will be interesting to see how those segments of the market play out,” Rippert said.

He added that these opportunities also apply to other parts of the market, such as retro and  composite lines more generally.

“There’s going to be a number of changes in those markets: the unbundling of exposures, more transparency in what is being taken on and better information will improve how we manage clash potential,” he said.

“Our view is that there’s opportunity there. Where there’s more transparency and better insight into managing clash potential. There’s pricing power for sure,” Rippert added.

Aspen reports its H1 results early next month, but these are likely to be skewed by the mammoth $3.57bn legacy deal it recently completed with Enstar.

Watch the 14-minute interview where Rippert discusses the following in more detail: