Travelling Light
Published
Introduction
Across the global property-casualty (P&C) market, insurers are discovering the benefits of travelling light.
Asset-light vehicles such as managing general agents (MGAs), fronting companies and reciprocal exchanges are burgeoning in the US, the world’s largest P&C market, and increasingly taking root elsewhere. The solutions they are offering, often buttressed by innovative data models, are changing the face of insurance, creating a more responsive market for insurance buyers at a time of increasing risk volatility
The assumption of risk, especially catastrophe-exposed risk, remains a heavy lift, necessitating a strong balance sheet. For every new asset-light entity, there will typically be a range of capacity providers committed to assuming most or all of the risk underwritten. It is through the partnership of asset-light and traditional balance sheet vehicles that an increasing volume of risk is originated, priced and insured in today’s market. In fact, the space between asset-light and asset-heavy can be seen as a spectrum with businesses constantly adjusting their models to assume more or less risk. For primary property insurers, the recent trend has been towards the assumption of more risk, not always enthusiastically, as reinsurance capacity has diminished and prices have soared, particularly for lower layers. Between 2001 and 2022, cedents assumed, on average, around 54% of nat cat losses. At 2023 retention levels, Howden Tiger calculates cedents would have absorbed 64% of these losses.
