➤ Everest Re Group Ltd.'s insurance division is looking to establish its presence in several locations in the Americas, Europe and Asia-Pacific over the next two years.
➤ Business from outside North America could account for up to a quarter of Everest Re's insurance division's gross written premium in five years' time.
➤ The "very challenging" risk environment will continue to maintain upward pressure on reinsurance pricing.
S&P Global Market Intelligence recently caught up with Juan Andrade, president and CEO of global reinsurer Everest Re, at the Rendez-Vous de Septembre reinsurance conference in Monte Carlo to discuss the company's strategy, including its expansion plans in international insurance, its progress on reducing property-catastrophe exposure and the condition of the global reinsurance market.
The following interview was edited for clarity and length.
S&P Global Market Intelligence: What stage are you at in determining Everest Re's insurance/reinsurance balance, and where are you hoping it will settle?
Juan Andrade, Everest Re Group Ltd. president and CEO |
Juan Andrade:
The reason for the hybrid nature of the company is really the diversity that it brings. It is about having a diversified set of earnings for the company that is sustainable. We believe by having both engines working exceedingly well, we are able to achieve that.
When we think about what's the ideal mix within the company, I really haven't drawn essentially a line in the sand on that. The reason for that is I care more about the profitability of the business than I do about anything else. The market may cooperate, may not cooperate, but what I do want is greater balance. We finished last year about 70% reinsurance, 30% insurance, and over time I think those numbers begin to equalize a little bit more.
On the international insurance side, which markets are you expanding into beyond the two offices you opened this year?
Where we are right now is we opened up a company in Chile, so that's essentially the first foothold on the primary side for our expansion there. Beyond Chile, we will be going into Colombia, Mexico, [and] Peru. Those will be the next follow-on countries, and we are already actively working to get our approvals in each of those countries.
In Europe, we already have a branch in the Netherlands, and we are going to be opening up branches, likely before the end of this year, in France, Germany and Spain. We also have our company approved in Singapore. We already have a team that's working there, and we're looking at Australia as a follow-on.
Are you targeting a particular area or size with your international insurance expansion?
A lot of it will be largely dependent on the market opportunity, but the markets that we have chosen are big economies. If North America is roughly 85% of the book right now, I would expect international could probably get to about 20%, 25% over the next five years. But this will be a pretty thoughtful expansion. This is not about planting flags and just putting premium on the books. This is really about creating a business that is going to give us the diversity that I'm looking for, essentially.
Everest Re is one of the companies that is being more cautious on property-catastrophe reinsurance business. What is the approach you are taking and why, given that it is arguably a good time to write more catastrophe business because of the price rises?
We as a management team basically defined an underwriting appetite trading range for property-catastrophe. What we felt we had in 2017, 2018 and 2019 was probably not what we wanted to do. We believe that by being [in that range] we can create less volatility, more sustainable earnings over time. What that basically means is that in benign cat years we will probably make a little bit less money, but in active cat years you are going to have significantly fewer losses, and ultimately that goes to the valuation of the company, margin accretion, all these kinds of things. So that is really the strategic rationale behind it.
The one point that is important to remember is that we're still a large property-cat writer. We're just doing it in a much more defined and disciplined way than I think we had done in the past, and I think that is really the key change and the nuance.
What are your thoughts on the direction of reinsurance pricing in both property and casualty?
If you look at what's going on with property right now, what's going on with the risk environment with inflation concerns, with the war, climate, etcetera, I think you're going to continue to be in a period of time where the market stays kind of where it is right now. Property-cat is clearly in a hard market. Some of the other lines are in a good place from the perspective of competitors being disciplined. I foresee this [continuing] certainly through the end of this year and really into next year as well.
I think we are in a risk environment that is very challenging, and I think that is going to continue to maintain the momentum on pricing and terms and conditions for a while, particularly for the longer tail lines.