Global insurer and reinsurer Arch Capital is looking to write more property reinsurance business as returns seem attractive, CEO Nicolas Papadopoulo commented following the release of the company’s financial results for the fourth quarter and full year 2024.
“We like the business (reinsurance). Absent the competitive nature and other people liking the business, too, we’re looking to write more of this business,” said Papadopoulo. “We think the returns are quite attractive. And, at 1.1, we had some opportunity to do so, based on our positioning. So, we were pleased by that.”
During the call, Francois Morin, Arch Capital Group EVP, Chief Financial Officer and Treasurer, explained that at the January 1st, 2025, reinsurance renewals, the company’s probable maximum loss (PML) experienced a small increase, but is still below the firm’s internal limits.
“As of January one, our peak zone, natural cat, probable maximum loss for a single event, 1-in-250 year return level, on a net basis, increased slightly and now stands at 9.2% of tangible shareholders equity. Our PML remains well below our internal limits,” Morin said.
Looking ahead to 2025, Morin noted that with the recent acquisition of Allianz’s U.S. MidCorp and Entertainment insurance businesses, and current market conditions, Arch expects its catastrophe load to represent approximately 7% to 8% of the Group’s full-year net earned premium.
The cat load guidance is also a little bit higher due to the California wildfire losses, Morin explained.
“The MC acquisition also adds, on a relative basis, a little bit of load to the increase of the cat load, because it’s a heavier property book than people realise. It didn’t really impact our PMLs because it’s in different zones. It’s more distributed. But when we think about the contribution to the cat load throughout the year, it has a meaningful impact.”
The acquisition of Allianz’s U.S. MidCorp and Entertainment insurance businesses by Arch Insurance North America, part of Arch Capital Group, was previously announced in August 2024.
Papadopoulo also addressed the California wildfires, predicting a significant loss for the reinsurance market that will impact rates for the remainder of the year.
He said: “This is a significant loss for the market. We pitched it around $30, $35 and $45 billion, and we believe that a significant part of those losses will go to the reinsurance market.
“And I think most reinsurers, including ourselves, have started the year with a loss ratio in the 20s or the 30s, or depending on your luck, maybe higher than that. And I think that it will have an effect on the rates for the rest of the year or so.”
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