David Flandro, Head of Industry Analysis and Strategic Advisory at Howden Re, spoke with Lori Chordas from AM Best TV before his panel at the Insurtech Insights USA 2025 conference. Flandro highlighted emerging risks as a significant interest in the market today, noting their impact over the past five years.
"Right now, we’re in an environment where risk premia are globally elevated," said Flandro. He attributed this to factors such as trade disputes, war risk, interest rate risk, and inflation risk. These conditions have led to higher hurdle rates for investors and increased pricing in reinsurance and primary lines.
"Elevated risk premia are driving pricing, they’re driving claims trends, they’re driving investment flows, and they’re driving capacity," he stated.
Chordas questioned Flandro on the growing role of Insurance-Linked Securities (ILS) in addressing protection gaps amid rising secondary perils and catastrophe losses. Flandro noted that ILS accounts for nearly 25% of total dedicated reinsurance capital. "ILS has played a crucial role in the last several renewals because many times, ILS is really the only thing that’s coming in the upper layers," he explained.
Flandro also addressed the global increase in secondary perils over primary perils during the past five years. He pointed out that interest rate spikes have caused significant market disruption. "Do you know what the biggest price driver of the last three or four years has been? It hasn’t been a big insured catastrophe loss. It was the 400-basis points interest rate spike in 2022 that happened in the wake of inflation," said Flandro.
He mentioned that this spike reduced industry capital by about 17%, leading to a hard market in reinsurance and highlighting blind spots within the market.
###