April reinsurance renewals continue firm market pricing, says Willis Re

Reinsurance market pricing remained firm in virtually all classes and territories as international reinsurance renewals completed for 1 April 2021 followed trends set earlier in the season, according to the latest 1st View Renewals Report from Willis Re. It reports that capacity was adequate across the board and no substantive changes took place in negotiations over exclusionary language. The report notes that despite above-average insured natural catastrophe losses in 2020, most property/catastrophe excess-of-loss programmes renewing at 1 April delivered a largely loss-free year. “Some property per-risk programmes were impacted by the worsening frequency and severity of non-catastrophe losses, which led to pricing increases and programme restructuring. Aggregate covers particularly saw greater focus on structure than on price, as reinsurers worked to distance these accounts from attritional losses. Long-tail lines, and particularly casualty excess of loss, faced increased pricing pressure from reinsurers coping with low investment returns,” it states. James Kent, global CEO of Willis Re, commented: “The market landscape has not seen much change since 1 January and consequently the important 1 April renewals saw more of the same between reinsurers and their customers. Market results for 2020 illustrate the challenges faced by the global reinsurance sector of reduced investment income, declining prior-year reserve releases, rising Covid-19 loss reserving, and increased volatility in the frequency and severity both of natural catastrophes and man-made losses. However, reinsurers’ 2020 results, when adjusted for Covid-19 claims reserves, have shown encouraging improvements in underlying combined ratios, and buyers’ immediate concerns over capacity availability and pricing have been allayed, leading to an orderly renewal.” The report says that although rate increases in some areas were lower than reinsurers were targeting, “the upward direction in rate has led to solid improvements across reinsurers’ portfolios, building on what was achieved at 1 January 2021”, adding: “Further assistance for reinsurers has come from the robust underlying growth of ceding companies’ premium incomes, driven by a combination of increased demand and rate increases on several primary classes of business.” Pandemic and silent cyber exclusionary language followed the approach set at 1 January, through a combination of standard clauses and, from some reinsurers, customised language written to align with original policy wordings, according to the report. Looking at particular classes, the Willis report reveals that the global cyber market continues to harden across the board, from primary insurance to all levels of reinsurance. “Despite the large pricing/rate increases being achieved in both segments (+25% to +40%), demand remains high with a noticeable reduction of available capacity. Increased demand is a major factor driving pricing, despite loss experience. Pricing is also being leveraged against potential changes in terms and conditions (limitations),” the report states. On the marine side, Willis notes that the market trend continues to be in a hardening phase but is restrained by ample capacity for vanilla marine programmes. It says that where the loss record justifies it there were significant rate increases, but more commonly there were high single-digit increases. According to the report, demand from insurance-linked securities investors proved strong, particularly for capacity made available through publicly traded bonds, which helped to moderate overall price increases. “The cat bond market has built on the momentum it established in Q4 2020 – with over $2.5bn of cat bond issuance observed this quarter. Significant demand persists for the cat bond product, exemplified by the vast majority of issuances both upsizing in terms of capacity issued and pricing at the bottom or below the initial pricing guidance,” the report states.

April reinsurance renewals continue firm market pricing, says Willis Re

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