SEATTLE–The chief executive of a major reinsurer said yesterday he believes that insurers will deal with the current soft market without making the same mistakes they did in the late 1990′s.
James H. Veghte, chief executive officer, reinsurance general operations at XLRE, made his comments in an interview here where he and other reinsurers are gathered to do business with insurers attending the Property Casualty Insurers Association of America's annual conference.
Mr. Veghte ticked off a number of market forces that he said are in place, which should keep insurers from taking on bad risks at bad prices as they did at the end of the last century.
The "natural brakes" on poor underwriting, he said, include the fact that "transparency of underwriting is vastly improved and tools on the reinsurance level are much more sophisticated than they were 10 years ago."
"There were a lot of lessons learned in the late nineties that will put a brake on the soft market," he said.
Mr. Veghte said his company will do its part to ensure that insurers do not get out of line. "We do multiple audits on our larger clients," he noted.
"If we see poor risk selection or sloppy pricing discipline, we'll retire [the risk] when the program comes up for renewal," he added.
But while Bermuda-based XL may do its part, Mr. Veghte said he does have a concern about reinsurers who do not have the tools in place to do proper monitoring of carriers in the U.S. market place.
"What worries me is people who write from abroad," he explained.
In general, he said he is "bullish on the market environment" and feels that short-tail lines should hold up, but he does have a concern about the casualty market.
Mr. Veghte voiced the opinion that property-casualty rates will be heading up again in the United States because of new risk models and pressure from rating agencies on catastrophe-exposed lines.
On the issue of capacity, he said it exists for most lines and even for large programs with an exposure to Florida risks that "can be completed at the right price."
Mr. Veghte, who is based in the carrier's Stamford, Conn., office, said he believes his company may rank globally as high as seventh, but there is no pressure to rise in size, because "we don't focus on top line growth–the focus is on underwriting."
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