Data transparency: a property market of the future

The reinsurance property market has been changing over the past few years. We have seen a change in terms and conditions as well as reinsurer risk appetites and most recently, the reinsurance industry in general has begun to make a sufficient profit again. This recent turnaround in profitability is principally due to the lack of large landfalling hurricanes or earthquake events, but also to more adequate rate levels and more reasonable attachment points. Now with these changes in place, what does the future hold?

Staying relevant

It would be short-sighted for a property reinsurer to revert to the days where margins were thin, and losses were prevalent. As a property underwriter it must be at front of mind to maintain relevance to clients and brokers, while building a business that can weather the uncertain and ever-changing risk landscape. Across LM Re, we are risk aware, not risk averse. A reinsurer cannot shy away from taking risk: it is our reason for being. However, in this ever-fluctuating environment, with climate change making predicting future events extremely difficult, we must be there to support our clients in the long term. 

Data transparency is key

At LM Re, the key to this sustainable future is data and transparency. The better quality of data our brokers and clients can provide us, the more confidence we have in our loss cost selections and therefore our pricing and level of participation. This is not exclusive to large clients: many smaller clients can use the sophisticated tools provided by reinsurance brokers and reinsurers to help them modify and future-proof their portfolios. In doing so, they can avoid having too much exposure in any one area and receive help with determining the proper deductible levels and adequate price for natural perils. Providing this data to reinsurers allows us to make more informed decisions regarding price and attachment points.

In the US, we facilitate underwriting insights meetings with clients, brokers, and members of our team to ensure there is a forum in which all parties can be transparent and share data. The lessons we have learned from these open forums are informing our global partnerships. The better data we receive the more mutually beneficial solutions we can provide to our ceding company clients and broker partners. 

Emerging risk: emerging tactics 

The onus is not all on the clients and brokers. Against the backdrop of emerging risk, it is crucial for reinsurers to adapt. We are seeing a greater need for a diverse skillset of workers to understand the changing risk landscape. Hiring climatologists and researchers, for example, allows us to better understand the impact of a varying climate. These experts delve into each specific peril, sharing insights that position LM Re to continue to be a consistent pillar to its clients and brokers. Reinsurers must look outside of the industry to develop an expertise, giving underwriters the necessary tools to meet the changing needs of clients. We are leveraging our natural catastrophe knowledge, skills, expertise and lessons learned across Liberty Mutual to best represent these needs.

For LM Re to be a consistent, stable provider of capacity to companies throughout the world, it is critical to focus on client selection, the quality of the portfolio and the data it represents. Brokers and clients are best supported by reinsurers who are consistent in their approach and able to support them on a long-term basis. For this to be possible, reinsurers must achieve rate adequacy and appropriate profit margins, consistently maintaining their balanced portfolios. If we have that level of transparency, we can continue to be risk aware and not risk averse.