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Casualty renewals varied widely at 1/1, brokers report

8th January 2021 - Author: Matt Sheehan

Re/insurance brokers have reported that casualty renewals varied widely at January 1, depending on individual circumstances including loss experience, covered lines and industry classes written.

Reinsurance renewalsCasualty pricing at 1/1 was heavily influenced by social inflation, the low interest rate environment and communicable disease, as well as the ample capacity that was available across most lines.

Guy Carpenter noted that there was additional pressure on other treaty T&Cs and pricing for some programs with more challenging loss experience or industry classes.

Financial lines proved to be an anomaly in the casualty market, with stable to improving terms due to the strong underlying rate environment as well as continued carrier underwriting discipline.

Additionally, cyber aggregate capacity saw continued tightening, while there was some new or expanded client interest in casualty clash coverage.

For casualty placements, Guy Carpenter reported contract language requirements around pandemic and communicable disease varied by line of business with workers compensation, long-term care, casualty clash and casualty programs with particular exposures requiring the most discussion.

According to data from Howden, casualty reinsurance rates-on-line, including adjustments for exposure changes and ceding commissions, rose by 6% on average at 1 January 2021, which was a marked increase on the corresponding data point recorded in 2020 (of 3%).

Higher loss cost trends and lower interest rates were key inflating factors, pushing up pricing overall for all but the top performers, although there were some offsets from reduced claims frequency in certain areas.

In particular, Howden noted that COVID-19 was a compounding factor at the renewals, with nervousness in the market about the emergence of pandemic liability losses down the lines.

These losses could possibly take months or even years to develop fully, with the more immediate impact of the pandemic felt more on the investment side of the balance sheet.

Howden believes investment yields will remain at historical lows for some time, having been negative for certain government securities prior to COVID.

“Risk carriers are now clearly unable to rely on investment income to compensate for increased loss trends, particularly with costs escalating to such a degree,” the broker noted.

Willis Re reported similar conclusions, noting that reinsurers were primarily focused on achieving premium rate adequacy at 1/1 and closing any perceived gap in technical rate versus achieved rates.

Reinsurers were also keen to better understand the underwriting appetites and key risk metrics within ceded portfolios, analysts said, adding that buyers providing the most comprehensive information obtained optimal results.

Willis Re further observed that casualty reinsurers in general maintained a pragmatic approach to COVID-19 exposures and avoided a blanket exclusion scenario.

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