{"id":97208,"date":"2023-01-16T17:51:00","date_gmt":"2023-01-16T17:51:00","guid":{"rendered":"https:\/\/www.commercialriskonline.com\/?p=97208"},"modified":"2023-01-17T09:35:51","modified_gmt":"2023-01-17T09:35:51","slug":"what-goes-around-comes-around-reinsurance-renewals-hit-insurers-hard","status":"publish","type":"post","link":"https:\/\/www.commercialriskonline.com\/what-goes-around-comes-around-reinsurance-renewals-hit-insurers-hard\/","title":{"rendered":"What goes around comes around: reinsurance renewals hit insurers hard"},"content":{"rendered":"

It wasn\u2019t so long ago that risk and insurance managers were accusing insurers of a knee-jerk reaction leading to a sudden hike in prices, with little warning, ushering in a hard market almost overnight.<\/p>\n

Corporate buyers scrambled for cover, prices shot up, and terms and conditions hardened. Many felt let down by the industry with little respect for loyalty to insurers or for well-managed risks. Above all, it was the speed with which the market changed that upset buyers.<\/p>\n

Insurers, for their part, pointed to a prolonged soft market with woefully insufficient rates, expanded coverage and broad terms and conditions, combined with growing losses and emerging risks. On the whole this point was accepted by buyers, although they questioned all risks being lumped together with little differentiation. They also questioned a market that had let things get to such a state that they had to have such a dramatic reaction.<\/p>\n

Fast forward a few years and suddenly it is insurers that are finding the reinsurance market has reacted much as the primary market did for corporates. The latest January reinsurance renewal has seen a dramatic hardening of rates in a number of lines.<\/p>\n

Reinsurers point to Hurricane Ian, with estimated insured losses of $50bn-$65bn and the second-costliest catastrophe loss event ever for the insurance industry after Hurricane Katrina in 2005.<\/p>\n

In the words of Swiss Re, the benign period from 2012 to 2016 in terms of cat losses \u201cled to industry underestimation of ever-growing property exposures due to a rise in values at risk in exposed locations, and continued urban sprawl and economic growth, all against a backdrop of hazard intensification as the planet warms\u201d.<\/p>\n

Then came tropical cyclones and secondary perils such as the Californian wildfires in 2017, 2018 and 2020. \u201cEven before Ian, however, our expectation was that supply and demand for reinsurance would converge at higher prices as the market adjusts to under-priced risks, and also due to constraints on capital,\u201d said Swiss Re.<\/p>\n

Hurricane Ian appears to have been the final nail in the coffin. Gallagher US noted: \u201cBefore Ian we were expecting price increases to moderate and to see more stability in the property market.\u201d But as broker USI put it: \u201cHurricane Ian shattered the hope for a swift return to a more stable insurance market environment.\u201d<\/p>\n

The 1 January 2023 reinsurance renewal has been pretty brutal by all accounts. This is just a selection of the choice comments from reinsurance brokers recently:<\/p>\n

Gallagher Re:<\/p>\n