Jamie Cook, chief partnerships officer at QBE Re, said current reinsurance market conditions remain sustainable but discipline is being tested, particularly by adequate capital and increased competition in specific lines of business.
In a recent interview with Reinsurance News during a visit to Bermuda, Cook emphasized that maintaining capital cost discipline is key.
“If we think back to the period from 2017 to 2022, the industry was not meeting its cost of capital in terms of ROE. So I think the way we translate that into today is that we probably look at rate adequacy as the right perspective as opposed to overall rate change.
“The most important thing for us is that the business maintains adequate pricing. From that perspective, I think we can still see prices coming down, but exceeding the cost of capital is still the most important issue,” Cook explained.
Beyond pricing, Cook believes structure, particularly attachment points, is as important to market stability as price.
“There’s going to be a massive structural adjustment in 2022-2023. For us, I think we’ve been consistent in how we talk about this. Structure is as important as price and at the moment we’re seeing widespread attachment points, which I think protects our economy and the economy of others in terms of sustainable markets,” he said.
Cook said terms and conditions and attachments were challenging the market and while discipline remained, these pressure points needed to be monitored.
“I think the discipline remains broadly intact,” the executive said. “I think it’s being tested by increased competition in certain industries where capital is really quite abundant. But I suspect, or at least the way we look at it, the real test may be structure rather than price.”
“Terms and conditions and attachments are real pressure points. Currently they are a hold, but I suspect we will continue to monitor closely. For us, the quality of the portfolio trumps quantity. So when we see some reduction in the adequacy of terms and conditions and attachments, I think that’s where we might take a step back. They are trigger points in how we view the portfolio, but currently we are seeing those hold points.”
Cook pointed out that different lines and regions operate independently, rather than a single reinsurance market cycle. This segmentation allows QBE Re to be insulated from fluctuations in any single category.
“One of the things that we’ve been very aware of and talked about before is building a portfolio that’s very balanced and has the right mix. So I think by building a balanced portfolio, we can insulate ourselves to some extent from the ups or downs in a particular category,” Cook commented.
Adding: “So I think it’s important to recognize that not every part of the market operates on the same cycle.”
When looking at future changes in the market, Cook highlighted loss experience, changes in risk exposure and structure as the three main catalysts for change.
“Our approach is to sustain steady growth over time, and we’ve built the portfolio to be able to withstand that growth,” he said. “But often what changes markets is loss experience, changes in exposure and structural changes.”
Against this backdrop, Cook stressed that the focus remains on long-term partnerships built on insight, alignment and shared value creation. In his view, disciplined underwriting combined with deeper customer relationships are factors driving QBE Re’s cyclical resilience.
Conclusion: “We are trying to build deeper, longer, more enduring relationships with our clients, which I think overcomes some of the issues that have historically existed in the reinsurance market. Buyers are increasingly favoring balance sheet strength and multi-line support, moving from a transactional view to a partnership view built on consistency and long-term stability.”
