Market Cycles

Laying the foundations to see through market cycles – how managing a global reinsurer portfolio requires big picture thinking

Having spent nearly 20 years in reinsurance at Chaucer, Chris Baker, Head of Global Reinsurance, long ago graduated from being one of the rising stars of the class, to a successful leader of a profitable portfolio. Having spent most of his career during a long period of softening market conditions where reinsurers faced continued pressure on their portfolios, he certainly learned his craft the hard way. We spoke to Chris about how Chaucer and the market has changed during his career.

As someone who took up an insurance job as a bit of a stop gap, Chris did not necessarily expect to find himself leading a large global team 20 years later. This extensive experience and understanding of reinsurance, combined with a personable approach, have served him well. Recently Chaucer’s Reinsurance Team topped the Gracechurch London’s Leading Underwriter table, as voted for by brokers, as well as Chris being voted in the overall top ten underwriters.

Getting to the bottom of what heading up a leading (re)insurer’s global portfolio really means, Chris describes his role with a metaphor.

This goal, is of course, an important one for the market, as reinsurance and its ancillary risk transfer counterparts exist to keep the insurance world turning.

“Really, all of what we do is in support of our function as a financial instrument, which enables insurance companies to trade and fulfil their potential”, Chris says.

In spite of this critical function played by his class of business, Chris is modest about how much of the team’s success can be attributed to him.

This current market cycle is relatively positive for reinsurers, but as with all cycles, this will likely turn, and hard markets tend to last far fewer years than softer cycles. Indeed, the majority of Chris’ career saw a softening cycle which only turned at the start of the 2020s, exacerbated by ‘black swan’ losses such as Covid-19 and Russia’s declaration of war on Ukraine.

In discussing the outlook for the 2025 reinsurance renewals and the coming year or two, at this time, Chris sees the reinsurance market as adequate but not sufficiently robust to warrant notable changes of direction on terms or conditions. Recent years have been affected by significant attritional losses from perils such as convective storm in the US, flood losses in Europe and wind in Asia.

Although things are currently acceptable for reinsurers by necessity, how did the company manage the difficult trough of the last soft cycle, which occurred in the mid 2010s?

“We maintained discipline, and cycle management. Of course, in some areas we had to reduce market share at that time and had no pressure to grow in an inadequate market. We put work in to ensure we had the right building blocks in place, including the right people and models, the whole infrastructure, so that we were ready when the market did change. Looking at that big picture over longer periods and cycle changes is critical to achieving positive results."

Looking ahead, although currently in a harder cycle, which may be prolonged by global factors such as climate change and geopolitical instability, Chris sees the way to ride out this current uncertainty and prepare for the next soft cycle, as much the same.

“When considering what our portfolio may need to look like in a few years’ time, we are also looking at what we can do with countercyclical lines of business which have a different outlook, as well other pockets of growth which don’t fall in line with the main speciality cycles.”

Chris’ approach is measured and clear, and it seems as though in spite of falling into reinsurance as many do, he may have been made for it. Having had a place at university to study economics, Chris found a job in insurance and deferred a year but enjoyed it so much he stayed. How does his resulting career fit with his plans when he started out?

“I came to insurance so young I had no preconceived ideas about what I wanted to do generally in life. I’ve always been interested in maths and physics and perhaps if I had gone to university, I would have become a civil engineer or something similar. I like the idea of designing a big bridge or a tunnel, and I like looking at the maths behind these sorts of things, so perhaps my brain is well suited to reinsurance. I also like getting away from my desk and looking at things analytically, so going to see clients and discussing their books has suited me well.”

Aside from his success and evidently finding his calling, what has kept Chris in the reinsurance industry so long?