RenRe said cautious on Japan, optimistic on Florida reinsurance renewals

RenaissanceRe, the Bermuda headquartered reinsurer and third-party reinsurance capital manager, is said to have a cautious stance on rate prospects for the upcoming Japanese renewals at April 1st, but a more optimistic outlook for the Florida and mid-year renewals.

Morgan Stanley’s analyst research team said that the reinsurance company predicts a modest increase in April’s renewal pricing for Japan.

This is aligned with market estimates for +5% to +10% rate increases across the wind and flood exposed property catastrophe reinsurance programs of the major Japanese carriers.

The analysts cite this as RenaissanceRe (RenRe) being cautious, but also note that the company was cautious on renewal opportunities last year, despite strong increases seen in Japan at the time.

RenRe has been one of the more cautious in that marketplace in recent years, clearly feeling that a more persistent level of price increases was required in the typhoon exposed programs.

We understand RenRe has also been cautious in the retrocession space, for Japanese perils as well.

But as the reinsurer expects a modest increase in pricing again, perhaps it will be a little more willing to deploy some additional capital there.

On Florida, the June 1st reinsurance renewals, RenRe is said to have a more optimistic view.

The Morgan Stanley analyst team explained that, “the company seemed less cautious on the Florida market than they had previously been.”

Previously, RenRe had halted expansion in Florida because of the issues related to litigation and social inflationary factors.

But now, the analysts said that RenRe appears more willing to assess the risk in the Florida market and perhaps deploy capital there if the terms are favourable at the mid-year 2021 renewals.

RenRe has some excess capital left to deploy, but it seems at this stage that this will go to where the best opportunities are presented, which given Japan is only expected to experience modest rate increases might point to the United States or Florida.

After the recent US winter storms, there is a chance rates on US nationwide reinsurance programs renewed around July 1st may prove particularly attractive, so we could see reinsurers like RenRe opting to wait out and hold steady in Japan at April 1st, in favour of seeing how Florida and the US look as those renewals get closer.