U.S. treaty reinsurance business led the way on rate increases at the July 1st reinsurance renewals, with their rates outpacing international contracts, according to broker Willis Re.
The broker reports a measured and prudent approach to the mid-year reinsurance renewals, as carriers sought to deliver on client value but with one eye always on rates as well.
The reinsurance market has proved robust through the Covid-19 pandemic, with capital levels recovering significantly to only be 5% down on the end of 2019 by the time of the renewals, having fallen by as much as 30% at the end of March.
That recovery was largely due to the bounce-back in global financial markets and asset values, which helped reinsurance capital recover and meant that reinsurers largely had the capacity they needed for renewal business.
James Kent, Global CEO of Willis Re, explained, “The global reinsurance market was not capital-constrained during the recent renewals, but has shown a greater level of prudence with an increased focus on underwriting profitability.”
Willis Re sees “longstanding underlying issues of rate inadequacy” as the main driver of hardening at the renewals, as reinsurers sought to recover lost ground.
“Measured measured rate adjustments” were seen across many classes of business and geographies, with U.S. treaty business leading the way at both June 1st and July 1st.
U.S. loss hit property reinsurance programs and accounts moved anywhere from +20% to +35%, while even loss free moved from +5% to +20% broadly.
“Double-digit risk-adjusted reinsurance price increases were seen for loss-hit catastrophe treaties and ranged from +10% to +20% for the programs of Australian and Latin American insurers, to as much as +35% in the Florida homeowner renewals. Rate increases were prevalent but much less dramatic for loss-free catastrophe treaties with limited peak catastrophe exposure,” the broker explained.
On the casualty side of the market, there were even steeper increases, especially for excess of loss reinsurance accounts that saw loss emergence in the last few months.
Reinsurers are recognising that they will be dealing with losses from the Covid-19 pandemic for some years to come, with only some $7 billion of losses currently reported by the industry.
Willis Re believes the impacts of the pandemic “may take several years to settle which will spread out reserving over many quarters.”
This is likely to help drive further firming of rates, or at least sustain those already seen.
However, the main message coming from the reinsurance broker is that reinsurers have been able to satisfy their clients needs, even in a time of stress.
CEO Kent said, “More persistent hardening is evident largely across the board, but reinsurers continue to exercise clear differentiation between clients, lines of business, and territories. The value of sustained relationships has once again been proved.”
Original Article Posted at : https://www.artemis.bm/news/u-s-renewals-lead-way-in-persistent-july-reinsurance-hardening-willis-re/