Reinsurance doing well

Lloyd’s of London 2023 underwriting profit doubles
Lloyd’s of London’s underwriting profit jumped 127% in 2023 to 5.9 billion pounds ($7.52 billion), it said on Thursday, as commercial insurers have cut back on riskier business and raised premiums.



Reinsurance is an EXTREMELY cyclical business. A recent podcast that I listened to discussed it a bit as part of a larger discussion regarding why insurance costs are rising rapidly in some parts of the country.

about this cylicality…is that driven by the fact that some catastrophes will eventually occur and then the reinsurance will have to pay (big), and then a quiet period will ensue and then another catastrophe?

Is that related to climate? Wouldn’t the accident be ‘averaged out’ out and be part of the business of receiving premium and paying out when accidents occur?
Or is the idea that there will be a pull down once in a while due to large payouts?


From following BRK I get that impression that the pattern in the reinsurance industry is that after a big disaster all the reinsurance companies become very conservative by raising premiums and cutting risks. Then over time they get greedy and start cutting premiums to gain market share. Then a big disaster happens and the cycle repeats.


Yep, this is pretty much exactly what happens. And what causes the cyclicality.

That and the randomness of giant claims. Claims are never going to be even, smoothed out, such as happens with, say, automobile or life insurance claims.

For example, hurricanes are the largest category. 2005 was a terrible hurricane year (including Katrina). That was followed by over a decade where there were no major (Cat 3 or higher) hurricanes that made landfall in the United States.



BRK bet big that 2023 would have a mild hurricane season and maxed out on reinsurance for the Florida property/casualty market.