Demand for July renewals will drive rate rises: Swiss Re

April reinsurance renewals saw rates increase further, with demand ahead of the July season setting the stage for pricing momentum to continue, said Swiss Re’s Gianfranco Lot, chief underwriting officer, P&C reinsurance. But Lot also warned of further tightening of terms to clarify war coverages in marine business.

In a Q&A on the April renewal season, Lot said client and reinsurer expectations were “better aligned” than at 1 January, which prepared clients for further rate increases. The process was “more measured” than the chaotic January round Lot said.

Rate increases for April renewals followed previous adjustments in Japan, but the global increase in risk frequency and severity of natural catastrophe events fed into discussion on rates, Lot said. Pricing reviews were also triggered by medical reimbursement covers from Covid-19, which had been previously underestimated by reinsurers.

With high volumes of business up for renewal in July from the US and Australia, Lot said “there’s likely to be more demand. In this sense, I expect a continuation of the current market momentum.”

The large proportion of Japan renewals in April helped drive a more orderly round, Lot said. Key wording changes were pushed through covering infectious diseases, non-damage business interruption and loss occurrence.

More change is needed, however. “In marine, we still see a need to further clarify war coverages following the outbreak of the Ukraine war in 2022. In aviation business, discussions around sideways limitations on proportional treaties have progressed and we see more and more markets subscribing to that approach,” Lot said.

Ahead of the conference season after the July renewals, Lot said earthquakes in Turkey and Syria, Tropical Cyclone Gabriel and floods in New Zealand so far this year will be the focus.

“I am anticipating discussions around the increasing frequency of natural catastrophe events and secondary perils… that seems to be elevated, at least from a first quarter perspective. It’s hard to say how that will change but by the half-year point we will have more data points,” Lot said.

Renewal conversations on casualty lines will take place in the context of significant awards from court verdicts. “The Swiss Re Institute reported that the median size of large awards rose by 26% for general liability cases and by 32% for vehicle negligence cases over the past ten plus years. This will inform renewal conversations on casualty business,” Lot said.