Inspirien sat down with London-based Simon Mills, Broker and Healthcare Practice Lead at Lockton Re, and Paul Sandi, Head of Casualty Reinsurance at Canopius Group, to discuss how a hardening market is impacting reinsurance — and vice versa.
Reinsurance, or when an insurance company is itself insured, is a level of protection reserved for high-dollar settlement amounts. While essential for an ecosystem of safety, it’s purpose was designed for periodic use, for when a settlement – usually from a jury – exceeds the market baseline.
In recent years, however, settlement amounts are trending upwards in a market Mills and Sandi describe as “volatile.” Insurance companies have been acting as a stabilizing force, absorbing the claims cost for many years, without passing every fluctuation onto their customers. But with claims getting larger and more frequent, and the reinsurance bucket tapped into more often, prices across the industry are going up.
In Alabama, for example, where Inspirien and many of their clients are headquartered, there is incentive for pricing to stay fair and equitable. “You can only suppress rates for so long before it catches up,” says Sandi.
The market has been here before; the year 2000 saw a similar price crunch which led to the expansion of coverage and underwriting options – from “beyond just doctor insurance into writing hospital insurance,” for example – and the evolution of the market as a whole, notes Mills. To which Sandi adds, “if you think about inflation in healthcare, there is an inflection point that it just isn’t economical or profitable to the business the way you’ve been doing it for four or five years.”
As for COVID, neither Mills nor Sandi, believe the pandemic has much to do with the current state of the market. The forces that got us here were underway well before COVID-19 hit.
Markets are nothing if not resilient which is why a long-term strategy and mindset helps to weather the seasons with grace. Regardless of whether it’s a hard or soft market, Sandi cautions not to look at last year’s numbers as an indicator of what next year might be, but rather to take a macro-approach and look back five, ten, fifteen years to gain the benefit of context. Changes are nothing to be worried about, but always something to plan ahead for because risk protection is a ultimately a long game.