David Govrin says reinsurers are holding firm on terms, even in the face of price softening. Meanwhile, forces of inflation, climate change, and geopolitics are reshaping the market in real-time, with profound and long-term effects
As the reinsurance sector’s leadership arrives in Monte Carlo, David Govrin, group president and CEO of global reinsurance at SiriusPoint, sees a market still anchored in underwriting discipline, despite the price softening of the past year.
Govrin describes three distinct reinsurance market environments – property, casualty, and specialty – each with its own dynamics and sub-segments.
Casualty remains broadly stable, he says, with steady pricing and commissions despite inflationary and social inflation pressures in the US as rate for most US casualty classes keeps apace with loss cost trends.
Property, by contrast, has seen rate reductions in the first half of the year, with most market participants citing 5–10% decreases.
“Terms and conditions and attachment points have held,” Govrin says, though in certain geographies, such as California wildfire business, higher attachment points have emerged in response to risk experience.
While price softening is a fact, Govrin argues that offering coverage enhancements in lieu of deeper rate cuts does not equate to a lapse in discipline.
Added to which, the scale of market hardening two years ago gave property underwriters ample price adequacy.
“If choice A is reducing price by X and choice B is reducing price by a percentage of X and giving something else that the client wants, that’s a negotiation,” he says. “I don’t view that as a lack of discipline. I view that as being responsive to clients.”
Looking ahead to 1 January, Govrin sees a market still highly sensitive to catastrophe events. If the rest of the year is loss-free, there will be continued pressure on price and or terms and conditions with reinsurers entertaining broader terms or lower retentions alongside further price adjustments.
“Property is always a big event away from hardening and no events away from softening,” he says. In specialty lines, competition is intense for many of the lines, with definitions of “specialty” varying widely.
He notes that some products are attractive for their low correlation with other lines, making them capital-efficient under certain models, but this can drive aggressive pricing.
“The real question is how much capital benefit you give for products that have lower or no correlation to others. That’s really a capital question.”
Diversification, he cautions, is not inherently good if it comes with inadequate risk adjusted pricing.
Beyond near-term renewals dynamics, Govrin points to climate change and related extreme weather as the most significant long-term force shaping the property market.
“Until now, in my lifetime, I can’t remember hearing about Milwaukee, Wisconsin, flooding,” he says. “These types of historical flood events and fires, in my opinion, are results of climate change.”
Reinsurers’ annual contract structures, he notes, give them greater agility to reprice or reallocate capital than primary insurers. Yet the underlying trend is clear.
“Ten years from now, we’re going to wake up and look back at all the flooding all around the world that we’d never seen before, and say, ‘Well, that was obvious.’ But we’re living it now,” Govrin says.
Social inflation in US casualty lines is nothing new, he notes, but loss cost inflation remains a live issue, interacting with wider geopolitical and economic factors.
Govrin sees geopolitical shifts, from trade wars to protectionist tariffs, as a mix of challenge and opportunity. “Uncertainty in the world of insurance is usually not a bad thing,” he says. “That’s why we’re here – to respond to uncertainty.”
Protectionist measures, he adds, can increase demand for certain types of cover, even if they also contribute to higher inflation. “I’m not sure we’ve really seen the impacts yet of all the tariffs from an inflationary perspective,” he says.
On delegated authority business, Govrin says the focus should be on long-term, specialist partnerships with strong operational infrastructure and transparency.
“Number one, someone’s got a reason to exist – they’re offering a product that is specialised rather than a commodity,” he says.
Track record, aligned interests, and the ability to provide detailed exposure and pricing data are all essential when choosing managing general agents (MGAs) to supply with capacity, he underlines.
If performance falters, remediation through rate is the preferred first step. If that fails, capacity may be withdrawn – but such decisions are not taken lightly. “You don’t enter a capacity relationship thinking it’s going to be short term,” Govrin says.
As January approaches, capital allocation remains central. “The market has performed reasonably well in terms of returns on capital, which means people are generating capital to put to work,” he says.
If the third quarter passes without major losses, Govrin expects that the market will have additional capacity to be deployed for growth, albeit selectively. He stresses that nimbleness does not mean chasing volume at the expense of return.
In partnerships, whether through business written directly or or via delegated authorities, this means being prepared to write less business rather than cut price to inadequate levels. “It’s always a struggle for companies to think about volume versus return – and that’s why there’s a marketplace.”
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