Despite the challenges, cedent needs were met at the June 1st reinsurance renewals as the market continued to function well, a trend analysts at Guy Carpenter (GC) expect to persist through the July 1st renewals and into next year.
In a recent industry note, Guy Carpenter, the reinsurance broking arm of Marsh, highlights a challenging June 1st renewals season in which capacity “ultimately came together”.
Reports suggest that most Florida reinsurance business saw double-digit rate increases at June 1st, while terms and conditions also tightened.
Guy Carpenter expects a similar outcome at both the July 1st 2020 and January 1st, 2021 reinsurance renewals.
“The reinsurance sector has shown itself to be well versed at navigating market-changing events, and the overriding message following June 1 renewals is that the market remains well positioned to support insurers through the current period of uncertainty and volatility,” says the broker.
Of course, the 2020 Atlantic hurricane season is now officially underway, and numerous forecasters are predicting an above-average level of activity.
For the remainder of 2020, loss activity will be a critical factor and with the sector already facing heightened claims as a result of the pandemic, a major event could drive losses to unprecedented levels.
Discussing the pandemic, Guy Carpenter notes that while widespread uncertainty remains, the coronavirus outbreak looks set to rank among the industry’s most expensive events.
“The pandemic has the potential to bring unknown loss impacts. It is also likely to be one of the slowest developing catastrophes that carriers have ever encountered, likely creating a prolonged period of uncertainty,” warns Guy Carpenter.
The reinsurance broker goes as far to say that combined with the insured cat losses that have already occurred so far in 2020, as well as additional cat claims that are typical in H2 2020, losses for fiscal year 2020 look set to approach the $100 billion mark for just the fourth time ever.
“Should claims from COVID-19 settle at the higher end of current market estimates, or losses aggregate elsewhere from the ongoing unrest in the United States or an active wind season, 2020 could go down as the most expensive loss year ever and test further the limits of some carriers’ capital resilience,” says Guy Carpenter.