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Buyers plan to use more reinsurance & ILS next year, survey shows

3rd December 2021 - Author: Matt Sheehan

Data from the latest Reinsurance News market survey, undertaken in collaboration with our sister-site Artemis, shows that protection buyers are planning to purchase more reinsurance and retrocession next year, in addition to utilizing more ILS backed capacity.

The survey looked at responses from hundreds of identifiable market participants, of which more than 70% make or provide input into reinsurance buying decisions.

Asked whether they plan to buy more or less reinsurance and retrocession protection at the upcoming renewals, roughly half (48.8%) said they expect the level of coverage used by their companies to remain at about the same level.

However, more than a third (35.1%) said they expect to buy ‘a little more’ protection and another 8.5% said they expect to buy ‘sigificantly more.’

This means that a significant 43.6% of the market is planning to increase its reinsurance or retrocession cover next year, according to the results of our survey.

Compared with the combined 7.6% that plan to reduce their spend, these results signal that reinsurance protection overall will be in much higher demand next year.

And the story was much the same when buyers were asked whether they planned to use more or less capacity backed by insurance-linked securities (ILS) next year.

Our data shows that slightly under half (44.6%) of respondents felt that their firms were likely to use about the same level of ILS capacity in 2022, while 29.2% expected to use ‘a little more’ and a further 9.3% expected to use ‘significantly more.’

It is worth noting that the camp expecting to use less capacity was meaningfully larger on the ILS capacity question, compared with the reinsurance one.

We found that 12.3% of the participants questioned are expecting to use ‘a little less’ (versus 6.8% for reinsurance/retro) while 4.6% are expecting to use ‘significantly less’ (versus just 0.8% for reinsurance/retro).

However, this still means that a combined 38.5% of survey respondents plan to use more ILS backed capacity next year, again far outweighing the 16.9% who plan to use less, which indicates that ILS capacity will also be in much higher demand in 2022.

And indeed, this conclusion is consistent with the rest of the data from our survey, which shows that the market is generally expecting to see price rises for reinsurance cover across all business lines next year, with loss-affected lines in particular forecast for large increases.

It’s perhaps unsurprising then, that respondents also said they will value price as by far the most important aspect to consider when choosing a reinsurance counterparty.

We’ve made the full results of this global reinsurance market survey freely available to our readers and we’re happy to discuss the results with industry participants and to discuss sponsorship enquiries from those looking to raise their profile in the reinsurance sector. Contact us.

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