Mapfre Re’s CEO ready to develop portfolio but warns structural changes needed at 1.1

Mapfre Re will seek to develop its existing reinsurance portfolio and client base to capitalise on rising demand after securing an additional €250mn ($262mn) of funding, according to CEO Eduardo Pérez de Lema.

Speaking with The Insurer TV following announcement of the capital backing, Pérez de Lema said the reinsurer was comfortable to continue to write cat-exposed business but warned pricing would need to respond to match the risk being assumed.

And with so much uncertainty around the outcome of upcoming renewals, he cautioned that it was too early to forecast the extent to which the reinsurer’s appetite to develop its portfolio would translate to premium growth in the year ahead.

“Our intention is to deploy [the capital] on our usual business – we are confident with the portfolio and clients that we have, but we realise that there is now an increase in demand for coverage.

“Also, we are now getting more risk adequate pricing on the risk that we will be taking, so we are now ready to develop the portfolio with our existing clients and existing footprint.”

For cat business, Pérez de Lema acknowledged that pricing has not kept pace with the loss experience of recent years.

“If the pricing now adapts to the new situation in the world, then we are happy to take the risk,” he said.

“We think it’s a core part of what we are supposed to do as a reinsurer and also as an industry.”

Pérez de Lema said the ultimate outcome of the upcoming 1 January renewals remains uncertain.

“We now have certain expectations, but it’s very early days and we don’t know yet if they will be met,” he said.

“Our expectation is that our ability to generate higher returns could be growing, but how that translates into actual premium growth is difficult to say.

“We are seeing a lot of program restructuring and we may see some business that we will have to exit because the market doesn’t move to the point where we need it to go.”

Pérez de Lema said there were “a lot of moving parts” that needed to be addressed both at 1.1 and subsequent renewals.

“There were features included in treaties that we need to review, such as co-insurance and event definitions.

“At the same time we have the dynamics of inflation, which we haven’t been used to over the last few years in many territories. We have the war situation and sanctions happening at the same time.”

He said structural changes would be needed to address the lack of profitability in existing portfolios.

“And at this point, we are not seeing a massive influx of new capital coming in that would change the dynamics. The good thing for us will be if we are able to go back to a healthy market for everyone – buyers and sellers – and if we can generate sufficient capacity to cope with risk.

“One of my biggest frustrations of the industry would be if we are not able to provide all the capacity that the market needs to cover the risk. And this is likely to happen in some parts of the world, where the reinsurance offered will be less than the demand. And that is a failure for us as an industry.”

In this interview, Pérez de Lema also discusses:

  • Further details of the capital allocation into Mapfre’s reinsurance business
  • The current hard market backdrop dynamics
  • Expectations for the 1 January renewals
  • How Mapfre Re aims to grow in 2023