Measured approach from reinsurers at April renewals despite flash points, says Willis Re

The April reinsurance renewals saw significant rate increases on loss-affected accounts, in some case as much as +50% for Japanese wind exposures, but loss-free business saw more modest rises, according to latest 1st View renewals report from Willis Re. It concludes that overall reinsurers took a measured approach to the April renewals. With the gradual hardening of the market during the past year, reinsurers approached the 1 April renewal season looking to build on the rating increase momentum, which up to this point had continued to be outpaced by the primary market, Willis states in the report. The largest risk-adjusted property price increases were seen on loss-hit catastrophe treaty contracts, which were up +30% to +50% for Japanese wind exposures. However, loss-free treaties saw less dramatic rises and, in a handful of cases, renewed as expiring. “Following the gradual hardening over the past 12 months, reinsurers approached the 1 April renewal season looking to build on the rating increase momentum, which up to this point had continued to be outpaced by the primary market. With the capital strength of the traditional reinsurance industry showing a significant increase as a result of improved 2019 results and only modest reductions in insurance-linked securities (ILS) capacity,” the report states. The Willis report notes that primary insurance company buyers were confident that enough capacity would be available to meet their needs, even for those looking to buy more limit, subject to acceptable terms and conditions for both parties, and agreement was reached on renewal terms in a “calm and logical fashion”. As for capacity, the report says that several buyers sought additional natural catastrophe capacity, some seeking more vertical protection and others looking to buy out co-insurance participations. It goes on to say that for the most part, traditional reinsurers were able to offer increased capacity along with some ILS funds, but notes that there were examples of some ILS funds reducing their offered capacity at 1 April, with the message that there had been recent redemptions by investors. “Poor property per risk and engineering results led to both pricing and condition improvements across many accounts. Casualty renewals were again under scrutiny in terms of loss development and, for the Japan renewals, the inclusion of difficult risks such as pharmaceutical products liability. Specialty classes with losses also saw reinsurers pushing hard on pricing, with some substantial risk-adjusted movements. The aviation market saw price increases in excess of 20% for the first time in nearly two decades,” states the report. On the issue of Covid-19, Willis notes that 1 April programmes that were ordered in good time were fully placed well in advance of the due date and have been completed without any Covid-19-specific exclusionary language. “For those programmes that were not completed well in advance, several reinsurers sought to impose Covid-19 exclusions; in some cases, reinsurers achieved these exclusions, but in other cases buyers have been able to provide comfort that their original polices have no exposure to Covid-19-related losses by issuing letters of understanding to reinsurers,” it states. James Kent, global CEO of Willis Re, commented: “The extreme gyrations of financial markets have had a significant impact on the assets of reinsurance companies, but fortunately the timing of the Covid-19 disruption has coincided with the global reinsurance market being in a very strong financial position, supported by strict regulation. Having demonstrated its ability to manage the operational challenges of Covid-19 so far, the global reinsurance industry is well placed to demonstrate its ability to manage the longer-term financial challenge and continue with its mission of providing support to primary insurance companies and their policyholders.”

Measured approach from reinsurers at April renewals despite flash points, says Willis Re

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