Column: Roger's Soapbox

The Underwriting Cycle Lives

By: | October 12, 2017 • 2 min read
Roger Crombie is a United Kingdom-based columnist for Risk & Insurance®. He can be reached at [email protected]

Here’s a joke. Why are they called pirates? Because they arrr.

Here’s another: Early last year, one of the global brokerage houses announced the imminent death of the underwriting cycle. “The inflows of new, lower-cost capital are helping to moderate (and perhaps kill) the reinsurance market cycle,” the broker stated, with all the authority that billions of dollars and acute market smarts could muster.

The broker has tens of thousands of employees and global clout, whereas I’m just a dude with a bad outlook. But I’ll tell you this much: The cycle is not dead. It’s resting.

The broker stated that a fall in U.S. property/casualty premiums as a percentage of GDP was evidence of the imminent end of reinsurance, showing up as “a proxy for the impact of the industry on the overall economy.”

The cycle is not dead. It’s resting.

The broker rated catastrophe models and “radical improvements in the technologies available to deploy capital very quickly, as and where needed” as the two most significant factors leading to the downfall of reinsurance.


Funny, that. The same company bleated about disintermediation in the 1930s by what was then called “alternative capital.” Today’s version of alternative capital is to be credited with taking down the reinsurance market.

The death of reinsurance, the broker said, feeds the growth of the ILS market. If companies would only abandon reinsurance and wholly embrace ILS, the broker said, greater stability could be guaranteed. Ha!

Too much money, allied to a pause of some years in heavily insured catastrophes, has been chasing too little understanding of business risk (e.g. cyber). A lull in economic proceedings always brings out forecasts of doom.

Then came this summer. I doubt the broker still thinks the underwriting cycle is over. Rather, with some ILS instruments being wiped out as the winds blew and the rains deluged, the cycle remains intact.

It was diminished somewhat as vast pools of capital sought better returns than have been available in interest-bearing accounts. Given the political and economic damage that might attend a meaningful raise in interest rates, they are stuck. Capital otherwise idle, or at the very least relaxed, has had to work for its living.

Big money seeks non-correlated alternatives, which is another joke. My fingers aren’t correlated to my toes, but soon after I fall off a tall building, their correlation would become apparent. In the early 2000s, what seemed to some a sensible conclusion, “the end of history” was declared and with it ever-expanding wealth for all. That opinion held water right up to 2007.

The inherent nature of markets does not, and will not, change in the short term. Harvey, Irma, Jose, the quake in Mexico and any other catastrophes that may occur between my writing this and your reading it, are a reversion to the norm, proof that the underwriting cycle lives on. Because what goes up must come down, and vice versa.

And that’s no joke. &

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

Pinnacle Entertainment’s VP of enterprise risk management says he’s inspired by Disney’s approach to risk management.
By: | November 1, 2017 • 4 min read

R&I: What was your first job?

Bus boy at a fine dining restaurant.

R&I: How did you come to work in this industry?

I sent a résumé to Harrah’s Entertainment on a whim. It took over 30 hours of interviewing to get that job, but it was well worth it.

R&I: If the world has a modern hero, who is it and why?


The Chinese citizen (never positively identified) who stood in front of a column of tanks in Tiananmen Square on June 5, 1989. That kind of courage is undeniable, and that image is unforgettable. I hope we can all be that passionate about something at least once in our lives.

R&I: What emerging commercial risk most concerns you?

Cyber risk, but more narrowly, cyber-extortion. I think state sponsored bad actors are getting more and more sophisticated, and the risk is that they find a way to control entire systems.

R&I: What is the riskiest activity you ever engaged in?

Training and breaking horses. When I was in high school, I worked on a lot of farms. I did everything from building fences to putting up hay. It was during this time that I found I had a knack for horses. They would tolerate me getting real close, so it was natural I started working more and more with them.

Eventually, I was putting a saddle on a few and before I knew it I was in that saddle riding a horse that had never been ridden before.

I admit I had some nervous moments, but I was never thrown off. It taught me that developing genuine trust early is very important and is needed by all involved. Nothing of any real value happens without it.

R&I: What about this work do you find the most fulfilling or rewarding?


Setting very aggressive goals and then meeting and exceeding those goals with a team. Sharing team victories is the ultimate reward.

R&I: What is the most unusual/interesting place you have ever visited?

Disney World. The sheer size of the place is awe inspiring. And everything works like a finely tuned clock.

There is a reason that hospitality companies send their people there to be trained on guest service. Disney World does it better than anyone else.

As a hospitality executive, I always learn something new whenever I am there.

James Cunningham, vice president, enterprise risk management, Pinnacle Entertainment, Inc.

The risks that Disney World faces are very similar to mine — on a much larger scale. They are complex and across the board. From liability for the millions of people they host as their guests each year, to the physical location of the park, to their vendor partnerships; their approach to risk management has been and continues to be innovative and a model that I learn from and I think there are lessons there for everybody.

R&I: What is the risk management community doing right?

We are doing a much better job of getting involved in a meaningful way in our daily operations and demonstrating genuine value to our organizations.

R&I: What could the risk management community be doing a better job of?

Educating and promoting the career with young people.

R&I: What have you accomplished that you are proudest of?

Being able to tell the Pinnacle story. It’s a great one and it wasn’t being told. I believe that the insurance markets now understand who we are and what we stand for.

R&I: Who is your mentor and why?


John Matthews, who is now retired, formerly with Aon and Caesar’s Palace. John is an exceptional leader who demonstrated the value of putting a top-shelf team together and then letting them do their best work. I model my management style after him.

R&I: What is your favorite book or movie?

I read mostly biographies and autobiographies. I like to read how successful people became successful by overcoming their own obstacles. Jay Leno, Jack Welch, Bill Harrah, etc. I also enjoyed the book and movie “Money Ball.”

R&I: What is your favorite drink?

Ice water when it’s hot, coffee when it’s cold, and an adult beverage when it’s called for.

R&I: What does your family think you do?

In my family, I’m the “Safety Geek.”

R&I:  What’s your favorite restaurant?

Vegas is a world-class restaurant town. No matter what you are hungry for, you can find it here. I have a few favorites that are my “go-to’s,” depending on the mood and who I am with.

If you’re in town, you should try to have at least one meal off the strip. For that, I would suggest you get reservations (you’ll need them) at Herbs and Rye. It’s a great little restaurant that is always lively. The food is tremendous, and the service is always on point. They make hand-crafted cocktails that are amazing.

My favorite Mexican restaurant is Lindo Michoacan. There are three in town, and I prefer the one in Henderson as it has the best view of the valley. For seafood, you can never go wrong with Joe’s in Caesar’s Palace.

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]