Both buyers and sellers of protection managed expectations well at the April 1st, 2022, reinsurance renewals, driven by its heavy focus on the disciplined Japanese market, resulting in a calm 1/4, according to James Vickers, Chairman International, Reinsurance at Gallagher Re.
We spoke with Vickers around the launch of reinsurance broker Gallagher Re’s 1st View April renewals report, which highlights an orderly season with sufficient appetite and favourable terms.
“It went relatively smoothly,” said Vickers. “I think primarily because expectations were well managed by both sides. But also, to be fair, this renewal season is dominated by the Japanese renewals where it’s always an orderly market, it’s quite disciplined.”
He added that, notably on property business, market participants pushed through original rate increases. While on the catastrophe side, which has experienced a couple of challenging years, rates on covers have moved “significantly” over recent years to a “completely different level.”
“So, in that sense, the opening discussions were much easier for reinsurers and for all parties. What we saw really at the 1st of April was a continuation of what we saw at the 1st of January. There weren’t actual rate reductions, and there were some modest rate increases on loss-free business. Obviously, business with losses is always a bit different,” said Vickers.
While some players have been adjusting their catastrophe capacity by either reducing it overall or looking to move higher up the tower, Vickers told Reinsurance News that capacity was there.
“Equally, coming in to be helpful was some of the class of 2020, the new reinsurers who were still in the process of building up their portfolios. So, there was a little bit of new capacity coming in,” said Vickers.
Typically, the Japanese-focused April reinsurance renewals features insurance-linked securities (ILS) sector participation, and this was no different at 1/4 2022, where, according to Vickers, it continued to play a relatively stable role.
“In this respect, the renewal was calm. Of course, there were a lot of discussions at an underwriting level around inflation, and the effect of inflation. Now, again, Japan is fortunate, Japan is a very low inflation country – I think they’re getting excited because inflation is going to be 2%. But, the fact is, it’s still a big issue, and that’s universal in all lines of business. So, I think in that regard, all relatively calm,” explained Vickers.
In light of Russia’s ongoing invasion of Ukraine, tightening of some of the sanctions language was expected, and as confirmed by Vickers, the market has now really moved to complete standard LMA 3100, which is a total blanket exclusion.
“For the non-marine business, there was virtually no other impact at all because they don’t have many war exposures. Little bit of talk on some of the trade credit business about exposures in Russia and Ukraine, but again, the Japanese don’t have much of that either.
“And, then, on the marine side, there has been a move to restrict some, particularly war on land. But again, Japanese haven’t got too much of that. So, the impact on the 1/4 renewals for the mainstream Japanese business was relatively modest,” said Vickers.
Looking ahead to the mid-year renewals, Vickers told Reinsurance News that while some areas will be more difficult than others, “I don’t see that for the majority of companies that they should expect anything particularly different to the trend that was set at 1/1, but I think around the edges, there are clearly pockets where life is going to be quite difficult.”
