W. R. Berkley watching cat & retro, potentially as “meaningful seller”

Insurance holding company W. R. Berkley Corporation recognises the opportunity in catastrophe reinsurance and retrocession right now, with its CEO saying yesterday that it could become a “meaningful seller” if rates move sufficiently.

W. Robert Berkley said during the insurers’ Q3 earnings call yesterday that his company would be “leaning in” to an expected hardening of property risks, particularly property catastrophe reinsurance.

Talking about market conditions and the expectation for rates to rise, Berkley said, “It is very possible that you will see us participate more significantly in the property cat space.

“It would be my expectation, to the extent we chose to participate depending on how attractive the market gets, that we would probably participate for a year or two, unlikely more than three, in a significant way.”

W. R. Berkley has been strategic on catastrophe reinsurance participation before, making the most of firming markets.

CEO Berkley continued, “It is pretty clear to us that property pricing, particularly cat-exposed property pricing, but property pricing in general is going up.

“We haven’t seen it in a long time, but it’s likely to be led by the reinsurance market and the insurance market I expect will follow and we will be leaning into that in every way that we think makes sense for the organisation.”

He went on to say that property catastrophe reinsurance and retrocession could be the most interesting area of the market in 2023.

“Property cat reinsurance, or even certain types of retro, those are things that we are paying close attention too, not just as a buyer, but potentially as a meaningful seller,” he explained.

“If we see, for example, in particular property cat reinsurance pricing getting to a level that we think makes sense, we have been making plans and positioning ourselves, as you would expect, to be able to participate in a meaningful way,” Berkley said.

Adding, “But we are only going to do that if we think we are getting paid enough.”

W. R. Berkley could benefit from its capital market relationships, should it choose to underwrite more catastrophe reinsurance and retrocession in 2023.

W. R. Berkley launched a Bermuda based special purpose insurer (ILS) named Lifson Re Ltd. in time for the January 2021 underwriting year, having raised $250 million in capital for the sidecar structure.

Through the first-half of 2022, the company significantly expanded its use of the Lifson Re collateralized reinsurance sidecar vehicle, with the Lifson Re sidecar underwriting $226 million of premiums, that were ceded to it by W. R. Berkley, in H1.

Lifson Re could be expanded further, to write business alongside W. R. Berkley, as a way to perhaps better-control cat volatility, while still earning from the incremental business, should the company target becoming a meaningful seller of cat capacity.

But W. R. Berkely is unlikely to go all-in on cat risk in 2023, it seems, with Robert Berkley stating, “It’s not going to become more than half of what we do, or something like that. But it will be noticeable relative to its size today and its contribution today, again, if the opportunity is there.”