Casualty Market to Remain Disciplined Through the End of 2025
Anthony McKelvy, co-founder and Managing Partner of Cayman Islands-based Northern Re, anticipates the casualty market to remain disciplined through the end of 2025, adding that the multiple years of significant positive rate increases were necessary to address not only the elevated inflationary environment but also the lengthening of claim development patterns.
McKelvy continued, “We believe the market is currently at the point where rates are adequate, and we’re seeing those rate levels continue to keep pace with loss trend plus any adverse development on prior years.
“Additionally, the property cat market is starting to level off from all-time highs which indicates demand for property risk has started to swing back in the other direction.”
According to McKelvy, this will help mitigate the spike in demand for casualty by those markets who pulled back their property capacity in 2022 and 2023 but still needed to hit certain growth targets. This will in turn reportedly aid in keeping casualty rates firm in the medium-term outlook.
Given that the firm launched in 2023, Anthony McKelvy also commented on how beneficial it has been to be able to avoid some of the challenges associated with prior years.
The first benefit he noted was the prior year loss reserve issues, adding that Northern Re won’t see that persistent year-on-year adverse development the commercial casualty market continues to report out, which he said is primarily driven by social inflation and court backlogs.
Another benefit McKelvy mentioned was the optimal market conditions, stating, “We are the direct beneficiaries of the hard lessons learned by the market over the past few years including increasing rates and minimums, shrinking limits, tightening of terms and conditions, and reducing exposure to tougher jurisdictions.”
McKelvy went on, “The MGA space has seen premium growth of >60% since 2020 as harder market conditions pushed many lines toward the MGA space.
“The confluence of these three benefits in conjunction with our focus in the MGA space affords us the current outstanding opportunity we now see to select the most profitable risks with strong track records and an emphasis on bottom-line results, placing us in a better position than our many of competitors to underwrite a portfolio of very profitable risks.
“We’ve worked very closely on this topic with our newest hire, Chief Underwriting Officer Vincent Pomo, who joins us from Everest where he was the Chief Pricing Actuary. His portfolio insights have already been felt in a big way and he will continue to drive value via his broad, global expertise.”
In case you missed it, check out part one of our interview with Northern Re’s founding brothers, in which they discussed a string of industry hot topics, including the “very warm welcome” the firm received from the market in 2023 as it saw a strong start to its operations.
Also, stay tuned into our sister publication, Artemis, for part three of this interview, where the pair comment on the role of third-party capital and ILS in their business.