Analysts at Gallagher Re have warned that new COVID-19-related losses emanating from the Asia-Pacific region may put a strain on first-tier accident and health (A&H) reinsurers through 2023.
The broker expects that the majority of these losses will be contained locally, but it does believe that the Lloyd’s market is likely to be impacted as well.
These losses are likely going to be retained net following the outbreak of the COVID-19 pandemic, it says, and the introduction of communicable disease exclusions which limited clients’ ability to aggregate claims.
Nevertheless, capacity for first-tier A&H reinsurance is still expected to remain stable into 2023 given what Gallagher Re views as its “excellent” long-term loss record and profitability.
Coming out of 1/1, the majority of renewals discussions in the A&H market seemed to focus around war, the ongoing conflict in Ukraine, and the impact on T&Cs under personal accident treaties, analysts note.
Exclusionary language for Russia, Ukraine & Belarus (RUB) was at the forefront of discussion, and there was a clear division in the market around the coverage reinsurers were willing to give in respect of war and RUB.
But overall, there was sufficient capacity across the market to get programmes home at preferred T&Cs for war and RUB, at the right price, Gallagher Re reports.
From a pricing perspective, the retrocession covers saw price increases in the region of 15% to 20%, with the pricing uplift predominantly being driven by loss activity outside of cat business and the rising cost of aggregate for key perils such as terror and nuclear, biological, chemical and radiological (NBCR).
The first-tier reinsurance market, in contrast, was less impacted due to the significant amount of capacity available in the market with clean programs seeing a price increase of approximately 5%, according to Gallagher Re’s data.