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Member, Beacon International Group, Ltd.
MONTE CARLO, Monaco—The continuing soft reinsurance market may be the norm, Martin Sullivan, deputy chairman of Willis Group Holdings P.L.C., said Monday.
Speaking at a breakfast event at the Rendez-Vous de Septembre in Monte Carlo, Mr. Sullivan said that, barring a “financial Armageddon,” reinsurers may have to deal with a marketplace where hardening occurs only in certain geographic areas or in certain lines of business.
He noted that previous hard markets occurred when there was a reduction in industry capitalization and short-term problems in rebuilding and accessing new capital. But improved actuarial and catastrophe modeling have attracted longer-term capital to the market, he said in the keynote speech at the PricewaterhouseCoopers L.L.P. breakfast.
Mr. Sullivan said the current levels of overcapitalization in the industry could be reduced by poor investments and losses, but that would not mean a return to the “capital starvation” that led to previous hard markets.
“2012 is going to be a very, very interesting year,” Mr. Sullivan said. If reinsurers continue to operate in a soft market, the question is where they can find growth. He predicted that next year would feature more merger and acquisition activity.
Also, during a question-and-answer session after the speech, Mr. Sullivan was asked what the next big liability issue might be.
He responded by noting that “rarely” does he go down a street anywhere in the world without “seeing somebody with something in their ears,” and that the next big liability issue could involve hearing.
“I worry about the number of things that go into ears these days,” Mr. Sullivan said.