The current good trading conditions in the reinsurance market can continue all the way into 2025, according to Juan Andrade, CEO of global insurer and reinsurer Everest Group Ltd.

"We see the market as having legs through 2024 and very likely into 2025," Andrade said in an interview in September. "We're not seeing any change in momentum at this point in time."

The global reinsurance industry is experiencing a hard market. Reinsurers have been raising prices and restricting coverage at key renewal dates throughout 2023 to counteract several years of heavy catastrophe losses. This remedial work is already boosting reinsurers' profits.

Andrade expects the favorable conditions to continue because "there have been no significant changes in the macro conditions" since May, when the company raised $1.5 billion to take advantage of the good reinsurance trading environment. "If anything, there's been more proof points of what we were saying back at the time."

Unrelenting losses

The trend for high catastrophe losses has continued in 2023. Catastrophes cost the industry $54 billion in the first half of the year, according to Swiss Re AG estimates, with $50 billion of this stemming from natural events. It has been far from quiet since. Aon PLC estimated that natural catastrophes alone caused more than $88 billion in insured losses in the first nine months of the year after a series of severe convective storms in the US and Europe, and wildfires on the Hawaiian island of Maui in the third quarter added to the first-half total.

There is also "still a significant amount of pent-up demand" for reinsurance cover from insurance companies because of the plethora of global risks the industry faces, including economic and social inflation and heightened geopolitical tensions in addition to high catastrophe levels, Andrade said. "All of that is still there."

Some new capital, including Everest's own $1.5 billion equity raise, has flowed into the reinsurance market to help meet this demand, but there is still an imbalance, according to Andrade. Some estimates have suggested there is a $100 billion capital gap in the reinsurance market, but even if the shortfall is closer to $40 billion, "nothing has come into the space at anything close to that level to really change that," Andrade said.

Everest is planning to use roughly 90% of its newly raised money at the Jan. 1, 2024, reinsurance renewals to capitalize on the "immediate short-term opportunity" in reinsurance, Andrade said. But the company is also still keeping a firm eye on the mid- to long-term opportunity in its primary insurance business, which accounted for 30% of Everest's gross written premium in the first nine months of 2023.

Part of Everest's long-term strategy is to increase the insurance portion of its overall business, and the push to take advantage of favorable reinsurance market conditions has not changed this, Andrade said. "Over time, as long as we gain more balance, that's really what matters."

International ambitions

The company is in its second full year of expanding its insurance business internationally. In Europe, Everest has added insurance branches in Germany, France and Spain to its existing operation in the Netherlands, in keeping with its plan. The company has also moved into the retail market in the UK in addition to the wholesale business it writes in Lloyd's of London at Syndicate 2786.

In Latin America, having set up in Chile, the company plans to get operations in Mexico and Colombia this year. And in Asia-Pacific, Everest is working on opening up in Australia this year, after launching in Singapore in 2022. Everest will make its Australia debut through its Lloyd's operation, Andrade said, but it is also pursuing its own license, which "takes a little bit longer."

"We obviously have targets for additional markets that we want to go into," Andrade said, adding that any decision to enter will be based on traction in existing markets, conditions in the target market and whether the company is ready for expansion.

Also, the company does not have unlimited appetite to expand. "I'm not thinking about being in 50 countries around the world," Andrade said. "We're in eight. And so if we end up at 10 or 12, maybe 15 over time, that's probably fine."

In Europe, for example, the company treats its operations in France, Germany and the Netherlands as regional hubs, which Andrade said is more efficient than opening full branches in all the countries where the insurer wants to do business.

Everest's Lloyd's presence, established in 2015, continues to be an important part of the group's international insurance, Andrade said. "It is a distribution point by which we can gain business that otherwise would not be attainable in the regional markets or in the retail markets."

Syndicate 2786 has been managed by Asta Managing Agency Ltd. since inception, but Everest managing the syndicate itself is "over time ... probably a logical next step," Andrade said.