Speaking in an interview with Reinsurance News at Reinsurance Rendezvous event in Monte Carlo this year, Adderley explained that long-awaited rate increases this year had driven some positive sentiment, but there is consensus that more is to come.

“One of the key themes we are hearing is reinsurers saying that the market needs to be firmer. They can’t survive unless it’s firmer,” Adderley said. “Conversely, brokers are constantly saying that some markets might go down, or that there won’t be much change.”

“At the end of the day though, most reinsurers seem in agreement that ‘we need markets to harden to survive over the long term,” he noted. “If that is true then, at some point, it would seem it has to move that way.”

After so many years of flat rates, the industry also seems to be more engaged with the developments it’s seeing, Adderley suggested.

“There definitely seems more to talk about,” he said. “I think the mood at Monte Carlo this year is better than other years with more optimism and interest being generated.”

The outlook for the insurance-linked securities (ILS) market also appears to be looking up, Adderley told Reinsurance News, with cat bond issuance expected to increase following fairly muted activity so far in 2019.

“Without question, I think cat bonds are going to pick up throughout the rest of this year and into next,” he predicted.

“We’re going to see an increase over the next few months until the end of the year. It will increase at the beginning of next year through the first six months of next year.”

Commentators have generally observed a ‘pause’ in the cat bond market this year, following the huge catastrophe loss figures from 2017 and 2018.

This has been accompanied by an unprecedented level of loss creep, particularly from complex events such as Typhoon Jebi in Japan.

Investors appear to have responded this year by exercising more caution, but Adderley noted that this kind of prudent behavior may entail further complications for the market.

“If there is, in fact, a flight to quality then, it’s going to be harder for new start‐ups and brand new funds to get off the ground because they won’t have the reputation,” he said.

Asked whether ILS managers are likely to find better solutions to dealing with loss creep and claw-back in future, Adderley said the response is likely to be varied.

“Some people will ask for claw‐backs and some won’t,” he concluded. “I think each ILS provider will deal with it differently. It’s going to be a mixed bag.”

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