Relative to other reinsurance markets, the casualty market remains generally stable following the January renewals period, according to a recent report by re/insurance broker Aon.
This is despite renewals being complicated by the demand-supply mismatch in property catastrophe. The quotation process was delayed and more involved than recent renewals, as reinsurers and insurers explored options to leverage casualty business in property renewals, Aon added.
Aon’s January Reinsurance Market Dynamics report stated that, in contrast to property, capacity in the casualty reinsurance market was plentiful, as reinsurers demonstrated an increased appetite for the class.
It also noted that while some reinsurers pushed for improved terms at January 1st, the balance of power remained with buyers.
“Following a period of underlying rate increases, reduced limit deployment and initial indications of 2020 and 2021 being benign years, casualty insurers entered renewals in a position of relative strength,” the report said.
“Reinsurers that were in-tune with these market realities proved more pragmatic and continued to support existing insurers as well as expand on market opportunities,” it continued.
“Others retracted as they expected the casualty market to follow the momentum of the property market and were unwilling to pivot even though this scenario did not materialise. This was not the case in the Professional Liability segment where primary rates are on the decline with many clients falling short of their rate projections and experiencing adverse development.”
In the US, within the general casualty space, there was continued divergence between pro rata and excess of loss reinsurance, analysts explained.
The report said: “Conjecture leading up to January 1 that ceding commissions had to come down substantially largely waned. The vast majority of our pro rata book renewed with flat ceding commissions; a few clients saw slight decreases.
“For excess of loss covers, discussion around social and economic inflation and the post COVID-19 environment continued. Excess of loss risk-adjusted rate increases were on average in the low single digits, however, based on individual portfolio characteristics and experience outcomes ranged from risk-adjusted rate reductions to high single digit increases.”
Regarding international casualty, according to analysts, the general insurance dynamic was similar to the US casualty, with treaty outcomes slightly more favourable for buyers.
“Quota share commission renewed flat or slightly up, while excess of loss rates were broadly ranging from single-digit risk-adjusted rate change down to single-digit increase,” the report stated. “Exceptions to these were poorly performing portfolios and/or non-standard reinsurance structures – consistent with other classes, reinsurers hit these with fierce terms or declined altogether.”
